Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

CITY OF WESTMINSTER BILL

Read the Third time, and passed.

GREATER MANCHESTER (LIGHT RAPID TRANSIT SYSTEM) BILL [Lords] (By Order)

GREATER MANCHESTER (LIGHT RAPID TRANSIT SYSTEM) (No. 2) BILL [Lords] (By Order)

Orders for consideration, as amended, read.

To be considered upon Tuesday 19 January 1988.

LONDON REGIONAL TRANSPORT BILL (By Order)

Order read for resuming adjourned debate consideration [10 December].

That the Bill be now considered.

Debate further adjourned till Thursday 21 January.

TEIGNMOUTH QUAY COMPANY BILL (By Order)

YORK CITY COUNCIL BILL [Lords] (By Order)

HAMPSHIRE (LYNDHURST BYPASS) BILL [Lords] (By Order)

Orders for Second Reading read.

To be read a Second time upon Thursday 21 January.

BRITISH RAILWAYS (LONDON) BILL [Lords] (By Order)

Order for Second Reading read.

To be read a Second time upon Wednesday 20 January at Seven o'clock.

Oral Answers to Questions — NATIONAL FINANCE

OECD Countries (Expansion)

Mr. O'Brien: To ask the Chancellor of the Exchequer what discussions he has had with Finance Ministers abroad concerning expansion targets for the Organisation for Economic Co-operation and Development economies.

Mr. Wray: To ask the Chancellor of the Exchequer what discussions he has had with Finance Ministers abroad concerning expansion targets for the Organisation for Economic Co-operation arid Development economies.

Mr. Holland: To ask the Chancellor of the Exchequer what discussions he has had with Finance Ministers abroad concerning expansion targets for the Organisation for Economic Co-operation . and Development economies.

The Economic Secretary to the Treasury (Mr. Peter Lilley): The OECD does not set expansion targets. Therefore, my right hon. Friend discusses more fruitful matters with his fellow Finance Ministers.

Mr. O'Brien: Is the Minister aware that before the on Venice conference last year the United States Treasury Secretary, James Baker called upon OECD Governments to try to set a recovery target? Since then stock markets have crashed and the statement by the Group of Seven countries did nothing, so Governments had to intervene. Is it not time that the United Kingdom Government started to intervene and to set up a programme to aid recovery in this country?

Mr. Lilley: Since the fall in stock markets it has become apparent that most major economies were growing more rapidly than seemed to be the case at the time. We are now confident that there will not be a recession in 1988. On the United Kingdom economy, we predict 3 per cent. growth in the non-oil economy, which is very healthy indeed. The major countries of the world have co-operated in ensuring that the difficult period following the financial market crisis has been coped with.

Mr. Wray: Does the Minister agree that the OECD estimates state clearly and categorically that the growth rate will fall from 2·75 per cent. to 1·75 per cent. in 1989? Is the Chancellor really saying that after he has sold off all the country's assets there will not be a recession or a slump, when there is an estimated balance of payments deficit of £5·2 billion?

Mr. Lilley: I do not think that anyone can be categorical about growth rates in 1989. However, we can be reasonably assured that there will be some growth in 1988, albeit perhaps more modest than in the past. As I said, the British economy looks set to do particularly well, in spite of the gloom that the hon. Gentleman hopes to convey to the House.

Mr. Holland: Surely the fact is that towards the end of last year the Chancellor said that there was no point in having a Group of Seven meeting unless there was agreement. There was no meeting, and there was no


agreement on anything significant. The statement at the end of December did not stabilise the markets until Governments intervened. The whole of OECD is now slowing down, and the effects of cuts in the United States budget deficit will aggravate that. How on earth can the Government be confident that the United Kingdom economy will continue to grow when the rest of the world is slowing down? Why do they not hold a meeting of the G7 countries to meet those targets for recovery asked for by United States Treasury Secretary Baker last year?

Mr. Lilley: The G7 statement did help to stabilise financial markets.

Mr. Holland: Why did the Government intervene?

Mr. Lilley: We never comment on intervention by the British Government. If the hon. Gentleman believes statements that other countries were intervening, he can draw that inference from the G7 statement. We are reasonably confident that the British economy will do well in future because the policies that have brought us prosperity are precisely the policies needed in times of difficulty, if difficulty should arise.
The Opposition's response to the past three questions sounds rather like the Noel Coward song that bad times are just around the corner.

Mr. John Townend: Does my hon. Friend agree that, because of the twin deficits—the trade deficit and the federal deficit in America—America cannot continue to be the engine of the world's economy? Britain is playing its part; its high growth rate has resulted in a small balance of payments surplus. Does my hon. Friend think that the two surplus countries of Japan and Germany are doing enough to fill the gap left by America?

Mr. Lilley: My hon. Friend is quite correct. It is important that the surplus countries as well as the deficit countries play their part in removing the imbalances that have plagued the world economy. The Japanese economy is growing strongly in terms of domestic demand and we hope to see a strengthening of growth in Germany as well. My hon. Friend is right. The British economy has been the strongest growing major economy in the western world.

Mr. Beith: Do not the Chancellor's autumn forecasts depend on major corrections in the United States economy and on an expansion in domestic demand in West Germany and Japan? As that has been the subject of the Foreign Secretary's discussions with the Japanese Government, how can the Minister regard it as a fruitless subject for discussion?

Mr. Lilley: No country in the OECD sets quantitative targets for GDP growth. That was the basis of the question that I answered initially. The outlook in Japan is for quite strong domestic growth, which will contribute to the removal of imbalances between Japan and the United States, and that is something that I welcome. I also welcome the presence of the hon. Member for Berwick-onTweed (Mr. Beith) today. I was sorry that he was not in the Select Committee yesterday when we were discussing, among other matters, VAT. We would have been interested to hear his views on where he would apply it.

Mr. Soames: Does my hon. Friend agree that growth within the OECD is inextricably linked to free trade? Will he assure the House that, together with our OECD partners, we will do all that we can to promote free trade with Japan?

Mr. Lilley: My hon. Friend has hit on one of the most important aspects of the future of the Western economy. We must resist all pressures to move towards protectionism. Free trade brings prosperity to all partners and we are foremost in promoting it.

Civil Service (Information Management)

Mr. Dalyell: To ask the Chancellor of the Exchequer if he has issued any guidance on information management in the Civil Service, as a result of lessons learnt during and since the Westland affair; and if he will make a statement.

The Paymaster General (Mr. Peter Brooke): No, Sir.

Mr. Dalyell: I gave the Paymaster General's office four days' notice of my question in the hope of a considered reply. Does the Minister dispute the enunciation by Sir Kenneth Clucas, who is a distinguished civil servant, that on 4 January the Prime Minister put Sir Robert Armstrong in a very difficult position, and that it was unethical for the Cabinet Secretary to embark on an inquiry to which he knew the answer before he started?

Mr. Brooke: I have nothing to add to what has already been said by my right hon. Friend the Prime Minister, and other Ministers, in statements and in reply to questions.

Mr. Marlow: Is my right hon. Friend satisfied that the system of information control within the Civil Service is sufficiently robust to prevent the leaking of unauthorised information to the hon. Member for Linlithgow (Mr. Dalyell)? If not, will he do something about it?

Mr. Brooke: I think that my hon. Friend will agree that his question had a rhetorical purpose, and that rhetorical purpose was caught.

Inflation

Mr. Bill Walker: To ask the Chancellor of the Exchequer if he will make a statement on the latest outlook for inflation.

The Chancellor of the Exchequer (Mr. Nigel Lawson): The forecast in the Autumn Statement was that inflation would be 4 per cent. in the fourth quarter of 1988. I shall present a new forcast at Budget time in the usual way.

Mr. Walker: Can my right hon. Friend tell the House the last time on which the rate of growth exceeded the rate of inflation, as it did in the third quarter of last year? Can he also confirm that low prices are good for competition, jobs and the economy?

Mr. Lawson: My hon. Friend is absolutely correct in pointing to the central importance of keeping inflation low for the strength of the economy. The very good performance of the British economy in all aspects over the past few years has been achieved because we have put inflation at the forefront of our policies. As for the comparison that my hon. Friend made between the rate of inflation and the rate of growth, it is more valuable to look at the figures for a whole year than for a quarter. We have not had the final figures for 1987 yet, and will not have them for a little while, but it may well be that 1987 will prove to have been the first year for a generation in which the rate of growth has exceeded the rate of inflation.

Dr. Reid: In view of the optimistic remarks of the Economic Secretary that good times are just around the


corner, will the Chancellor confirm that Treasury forecasts show that next year there will be a higher rate of inflation, a lower rate of growth and a worse payments crisis than last year? What does he think Noel Coward would have said about that?

Mr. Lawson: I will not answer the last part of the question, because to sing it would be out of order. Certainly the forecast is for a slightly higher rate of inflation in the fourth quarter—not for the whole year, because we do not make that forecast—of 1988 than there was in the fourth quarter of 1987. Nevertheless, that rate of inflation forecast for the fourth quarter of 1988 is not merely one quarter of the average rate of inflation when the Labour Government were in office, but is only about one half of the lowest figure that they achieved in any month during the whole of their period in office. As for the forecast rate of non-oil growth, it may be lower than last year, but it is higher than the Labour Government ever achieved in any year of their term of office.

Sir William Clark: Is my right hon. Friend aware that most thinking people are well aware that one of this country's main achievements under his guidance has been the low rate of inflation?

Mr. Holland: What about mass unemployment?

Sir William Clark: Does my right hon. Friend further agree that the one thing any Government can do to help people on fixed incomes—pensioners and the like—is to keep the rate of inflation down so that the value of their money does not deteriorate, as it did in the 1970s?

Mr. Lawson: My hon. Friend is absolutely right. During his very thoughtful and accurate question I heard a sedentary interjection from one of the junior Opposition spokesmen that there is mass unemployment. I should have thought on this day, when we have the figures showing that there has been a fall in unemployment over the past year of over 500,000, the highest ever fall in unemployment, that at least would have been welcomed by the Opposition.

Mr. Chris Smith: If the Chancellor places such importance on the rate of inflation—as he clearly does, because he said yesterday to the NEDC that avoidance of inflation was at the "very heart" of Government economic policy—why have he and his Government taken a series of decisions in the past three months deliberately to fuel inflation by pushing up electricity prices, rents in the private and public sectors, water rates and nationalised industry prices? Is he proud of that?

Mr. Lawson: I afraid that the hon. Member does not have the first idea of what causes inflation or what the rate of inflation is. The rate of inflation now is far lower than anything achieved by the Labour Government during their period in office. Not only does it compare very well with our past, but our relative inflation performance compared with other major countries has improved substantially.

Council of Finance Ministers

Sir Anthony Meyer: To ask the Chancellor of the Exchequer when he next intends to meet his counterparts in the European Council of Finance Ministers; and what matters he expects to discuss.

Mr. Cash: To ask the Chancellor of the Exchequer when he next intends to meet his counterparts in the European Council of Finance Ministers; and what matters he expects to discuss.

Mr. Brooke: The next meeting of the European Community's Economic and Finance Council is expected to be on 9 February. The agenda has not yet been decided.

Sir Anthony Meyer: May I ask my right hon. Friend—and also say what a pleasure it is to describe him thus —whether, given Her Majesty's Government's commitment to achieving a single European market by 1992, he will discuss with his European colleagues arrangements for the reduction and eventual elimination of all customs examination of passengers arid goods travelling between countries in the European Community?

Mr. Brooke: My hon. Friend will recall that under the Single European Act we have retained control of our own border arrangements on drugs, terrorism and antiques. I think that my hon. Friend will recognise the continuing relevance of Customs and Excise to that task.
I am most grateful to him for his initial remark.

Mr. Cash: Will my right hon. Friend note that the Select Committee on European Legislation recently produced a report drawing attention to the grave danger of the EEC proposals on value added tax? Furthermore, will he note that we have absolutely no intention of agreeing to those proposals, any more than Pym and Hampden had of paying ship money back in the 17th century, and that we regard them as gravely detrimental to the powers of our Parliament and its right, and the right of the Government, to decide and allocate tax priorities in the interests of our people?

Mr. Brooke: The Government are studying the proposals made by the Commission for indirect tax approximations, but have made it clear that we could not accept any proposals that would restrict the United Kingdom's right to use zero-rating. The United Kingdom is not alone in having difficulty with the proposals. Tax changes can be agreed only where there is unanimity.

Mr. Winnick: When the meeting with the Finance Ministers takes place, will they be told of the pressure from the SDP and Liberal leaders for VAT to apply to children's clothing, food, fuel and newspapers? Will they also be told that, while the British Government's economic policies are increasingly discredited in this country, it seems that the leaders of the SDP and the Liberal party have nevertheless been converted to Thatcherism?

Mr. Brooke: There are a number of non sequiturs in the hon. Gentleman's question, but I, too, have noted the interesting but courageous proposals put forward by the alliance yesterday.

Mr. Campbell-Savours: When the Minister meets his European counterparts, will he raise with them the fact that the Kuwaitis are increasingly purchasing large blocks of shares in European companies? Is the Minister aware that, despite assurances given by the Chancellor to the House the other day, the Kuwaitis have now increased their holdings in British Petroleum, and are using London broking firms to do so? Will he act now, in the national interest?

Mr. Brooke: Under the internal market, of which the Government are in favour, British newspapers are freely


available throughout the Community. I have every confidence that my colleagues among Finance Ministers in the Community will have read of the developments concerning share purchasers to which the hon. Gentleman referred.

Mr. Watts: Will my right hon. Friend impress on his European colleagues that there is no need for any increase in EEC own resources and that their priority should be the imposition of firm budgetary control, which was promised at Fontainebleau but for which we are still waiting?

Mr. Brooke: Whichever Minister represents the British Government at Ecofin, he will certainly bear in mind what my hon. Friend has said. However, as the European Council will be meeting in Brussels the following week, there will he an even more adequate opportunity then.

Mr. Gordon Brown: On the question of the EEC's VAT proposals, and notwithstanding the new proposals of the third party, the fourth party and the fifth party in British politics, does the Minister agree that, outside the alliance and Lord Cockfield, there is no public support for any attempt to impose VAT on vital necessities? Will he give us the assurance, which he has not yet given that the Government will implement none of Lord Cockfield's demands.

Mr. Brooke: We have made a number of specific pledges concerning zero-rating, and the House would not expect me to add to them today.

Industrial Productivity

Mr. Stevens: To ask the Chancellor of the Exchequer what has been the growth of industrial productivity in the British economy over the last 12 months.

The Chief Secretary to the Treasury (Mr. John Major): In the three months to October 1987 manufacturing output per head is estimated to have been 7¼ per cent. higher than a year earlier.

Mr. Stevens: Does my right hon. Friend agree that that substantial increase in productivity is a major factor in keeping British industry internationally competitive? Will he also confirm that manufacturing output is growing faster than at any time since the early 1970s?

Mr. Major: I certainly confirm what my hon. Friend has said. I should add that manufacturing output has now recovered from its loss during the recessionary period of 1980–81. Output is now above pre-recession levels and is rising sharply. We expect that it will continue to do so.

Mr. Morgan: Would the Minister care to comment on the statement made last week in Dundee by the governor of the Bank of England, who said that growth in the British economy was unsustainably rapid? Before the governor made that statement, were his views discussed with the Government or, as his train passed through Nottingham on the way to Dundee, did he have the idea of forming his own branch of the UDM —the union of disgruntled monetarists?

Mr. Major: I certainly cannot say whether the latter point is true. However, the governor was echoing what my right hon. Friend said to the Select Committee on the Treasury and Civil Service some time before. Specifically, my right hon. Friend said that the rate of growth prior to October, which was substantially above trend, was not

likely or expected to be sustained next year. However, output next year in the non-oil economy is expected to be 3 per cent. and that represents a substantial level of growth and is substantially higher than that achieved at any stage under the previous Labour Government.

Mr. Neil Hamilton: Does my right hon. Friend agree that one reason for this rapid increase in output and growth is that, today, it is worth working because one can keep more of what one earns? Therefore, while it is welcome that the Labour party supports reducing the proportion of GNP that is taken in taxes by cutting spending, is it not unfortunate that it is only the New Zealand Labour party which supports that policy?

Mr. Major: I understand that, from time to time, attempts have been made to introduce some of the ideas of the New Zealand Labour party to the Labour party of this country, but with minimal success. My hon. Friend is entirely right about the supply side effects of lower taxation, and my right hon. Friend the Chancellor is acutely aware of those effects.

Mr. John Smith: If the Minister is claiming success for the Government's industry policies, can he explain why a balance of trade surplus of £5 billion has been turned into a deficit of £8 billion? What is the Government's strategy for correcting that difficulty?

Mr. Major: The right hon. and learned Gentleman will know that in the period since 1981, and for the first time in many years, export volumes have grown at a similar rate to the world trade in manufactures. That feat was not achieved at any time during 1974–79. The right hon. and learned Gentleman—uncharacteristically in my judgment—is selling British manufacturing short. It is doing exceedingly well, and the size of our export volumes is the clearest possible illustration of that success. The size of the import volumes has a direct relationship with the fact that the British economy is growing substantially faster than that of our competitors. The right hon. and learned Gentleman should be well aware of that.

Industry (Costs)

Mr. Ian Taylor: To ask the Chancellor of the Exchequer what estimate he has made of the relative benefit to British industry of (a) I per cent. off interest rates and (b) 1 per cent. off pay rises.

Mr. Lilley: A 1 per cent. moderation in pay rises would be worth roughly four times as much to British industry as a 1 per cent. reduction of interest rates, even if that were sustained for a full year.

Mr. Taylor: I am grateful to my hon. Friend for those extremely interesting figures. Does he believe that industry could help itself by keeping a tighter grip on its unit pay costs and thereby ensure that inflation falls, which would lead to a decline in interest rates? Does he also believe that the statistics would be extremely helpful if those on the Opposition Front Bench understood what causes inflation?

Mr. Lilley: My hon. Friend is absolutely right to highlight the importance of industry keeping control of its pay costs. I should especially like to pay tribute to the management and employees of the export industries, because the strong rise in productivity that they have


achieved has enabled them to keep their pay costs stable up to now, despite the considerable increases in the real earnings of the employees.

Mr. Grocott: On the subject of interest rates, has the Minister had a chance to see the evidence from the National Consumer Council on consumer credit, which shows that eight chain stores are charging rates of interest between 32 and 39·9 per cent.? Does he not agree that that is a swindle, and what will he do about it?

Mr. Lilley: I have not seen the figures to which the hon. Gentleman referred, but I shall examine them. It is now obligatory on those offering credit to make clear the terms on which they offer that credit. The best guarantee that people are not swindled is that they have competitive alternatives to which they can turn.

International Finance Ministers

Mr. Tim Smith: To ask the Chancellor of the Exchequer when he is next due to meet the Finance Ministers of the other major industrial countries to discuss the international financial situation.

Mr. Bowis: To ask the Chancellor of the Exchequer when he is next due to meet the Finance Ministers of the other major industrialised countries.

Mr. Lawson: I am in regular contact with my opposite numbers in other G7 countries.

Mr. Smith: Does my right hon. Friend agree that one of the factors that makes it difficult for managers in industry and commerce, especially those involved in exports, to forecast and plan ahead is the volatility of exchange rates? What measures will he be urging upon his counterparts at the next meeting to try to achieve greater stability in exchange rates?

Mr. Lawson: I agree with my hon. Friend. What are needed within a climate of low inflation all round are domestic policies that will sustain reasonable stability in exchange rates, which is of the first importance to successful trade and industry. I hope to say a little more about that in the debate that will follow later today.

Mr. Bowis: Does my right hon. Friend agree that it is good news that we have had five consecutive years of growth in the Group of Seven industrialised countries? It is doubly good news that Britain is at the top of the league for such growth. It is a pity that Britain is at the top of another league table—the league table of the Opposition parties, who see nothing but unremitting gloom and despondency every time that something goes right.

Mr. Lawson: That is a characteristic of the Opposition, and a rather sad one. It is not doing them any good, or doing any credit to the country as a whole. I found it particularly interesting at the meeting of NEDC yesterday, which I had the honour of chairing— [Interruption] This is a very moving moment in the history of the House, with the entry of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), but we are still one short.
It was very striking that at the meeting of NEDC yesterday afternoon the TUC openly acknowledged the economic success and the economic strength of Britain at present. The argument was over priorities. Our priorities were different from its priorities, but it acknowledged Britain's economic success and strength.

Mr. Robert Sheldon: Has the Chancellor of the Exchequer seen today's reports that the United States is selling special drawing rights for yen? That is the nearest thing to selling gold for yen. Does the Chancellor believe those reports, and if he does, does he think that the United States will properly defend its currency?

Mr. Lawson: I have seen those reports and I have no idea at present whether they are true, but clearly that would be a move consistent with a determined American attempt to defend the dollar.

Mr. Mullin: What does the Chancellor think would be the career prospects for a Finance Minister in Europe or in Kuwait who sold 20 per cent. of his country's largest company to a foreign power at knock-down prices?

Mr. Lawson: The shares were sold by Her Majesty's Government at a very good price indeed. It was certainly not a knock-down price, and the British taxpayer did very well as a result of that. Contrary to what the right hon. arid learned Member for Mon klands, East (Mr. Smith) predicted, we have had to buy back only a tiny proportion, less than 2 per cent. It is true that following the stock market fall those shares fell considerably, along with many others, and the Kuwait Investment Office took the opportunity to buy, not all of them, but a substantial block of those shares. Anybody could have done that. However, as I told the House on Monday, it has given an assurance that it has no intention of seeking control of BP, nor any management role.

Mr. Yeo: Will my right hon. Friend reassure the House that he will avoid committing too much of Britain's financial resources to concerted foreign exchange support operations for the dollar until it is clear that the United States Government are adopting policies that are themselves likely to produce a firmer currency?

Mr. Lawson: That is certainly a policy position which I have taken throughout. During the greater part of the period since the Louvre agreement the Americans had been following such policies and were fully committed to the defence of the dollar. There was a period towards the end of last year when that commitment by the American Government appeared to be in doubt. Subsequently, however, they have taken action which suggests that they intend to defend their currency. The commitment of the United States is crucial, both in terms of intervention arid in terms of the appropriate internal domestic policies.

EC (Internal Market)

Mr. Cryer: To ask the Chancellor of the Exchequer what assessment he has made of the feasibility of the internal market of the European Economic Community in the absence of the harmonisation of value added taxation rates.

Mr. Brooke: The Government strongly support the removal of barriers to trade within the Community, but they do not believe that approximation of VAT rates is a necessary part of this process.

Mr. Cryer: If the Minister takes that view, will he formally repudiate the views of the Conservative appointee on the EEC Commission, Lord Cockfield, who believes that harmonisation of VAT is necessary? If he repudiates Lord Cockfield's views — and he has the opportunity to do so now—will he also repudiate any


attempt by the Government to put VAT on food, fuel and clothing, or on books and newspapers, which would be a tax on knowledge for the first time in our history?

Mr. Brooke: Lord Cockfield is in no sense answerable to the Government. It will not have escaped the hon. Member's attention that there have been disagreements between the Government and Lord Cockfield in the context of his proposals. In response to an earlier question I indicated that I will be making no further pledges during the afternoon beyond those already given.

Mr. Higgins: As the Government have made it clear that they propose to use their veto, if necessary, to defend the zero-rating concept, will my right hon. Friend make it absolutely clear to the Commission that there is no point in putting forward proposals which involve its abolition?

Mr. Brooke: My right hon. Friend is correct in stating the Government's position. The approximation proposals are unacceptable as drafted, but discussion between member states is at a very early stage and it would be wrong to anticipate the outcome. The United Kingdom is committed to completion of the single market, but how this is best achieved is a matter for discussion between member states. I repeat the pledges on zero-rating which have already been given by the Prime Minister.

Dr. Marek: The country will wish to know that the Minister will resist the arguments for value added tax of the party or parties of whom two representatives sit below the Gangway. The Minister has said that the Government have made specific pledges about what they will do and what they will allow in regard to the introduction of VAT. In view of this important occasion, will he list those pledges specifically? Do they include books, periodicals and medicines?

Mr. Brooke: I share the hon. Gentleman's interest in the proposals that have emerged from the alliance Benches. But even into the life of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) some pleasure must have entered yesterday when the hon. Member for Rochdale (Mr. Smith) issued a statement saying that he was opposed to VAT on food. As to the pledges, those that have been given by my right hon. Friend the Prime Minister relate to food, domestic fuel and children's clothing and footwear.

Economic Outlook

Mr. Knox: To ask the Chancellor of the Exchequer if he will make a statement on the economic outlook for the rest of the current financial year.

Mr. Major: The United Kingdom economy continues to show the winning combination of strong growth, low inflation and sound public finance.

Mr. Knox: The Chancellor's economic policies have resulted in a substantial reduction in unemployment during the past year. Does my right hon. Friend think that present policies will result in a similar reduction in unemployment during the next 12 months, and does he think that there is any chance that unemployment will be less than 2 million in a year's time?

Mr. Major: I certainly do not propose to make forecasts of the future rate of unemployment. My hon. Friend is entirely correct to point out that unemployment

has fallen by over half a million in the last year and 300,000 in the last six months, and today's figures again show unemployment down by 35,000. I am particularly pleased to see youth unemployment down and an especially welcome fall in the west midlands, Wales, the north-west and the north.

Mr. Ashley: Will the Chief Secretary bear in mind that the collapsing dollar is very greatly damaging to our export industries, especially the pottery industry? Notwithstanding what was said a moment ago about our exports, will he do what he can to strengthen the dollar in order to aid our exports?

Mr. Major: The fall in the dollar is undoubtedly unsettling, as my right hon. Friend has made clear on a number of occasions. The performance of British exports in recent months has been excellent and we are keen to ensure that that contiinues.

Mr. McCrindle: Does my right hon. Friend perceive any danger of overheating in the economy in the months that lie ahead? Can he give the House any indication of what steps the Government have it within their power to take if that trend should develop?

Mr. Major: We do not see any signs of overheating, so I think that the second part of my hon. Friend's question does not arise.

International Debt

Mr. Campbell-Savours: To ask the Chancellor of the Exchequer what initiatives he is taking with Finance Ministers of creditor countries to address the re-scheduling of a share of the debt of Latin American countries.

Mr. Lilley: The United Kingdom will continue to play its part, along with other creditor countries, in rescheduling its share of developing countries' official debt at the Paris Club. As for commercial debts, that is a matter for the banks and countries concerned.

Mr. Campbell-Savours: But is it not true that at the end of the day the bill for Third world debt written off by the banks may well be paid by the taxpayer, as banks write off losses against profits? If that is the case, does it not mean that the taxpayer may well be paying for ill-considered and unnecessary projects in some Third world countries? And, if that is the case, would it not be better to spend public money, taxpayers' money, in another way by simply increasing the amount of money available for Third world aid?

Mr. Lilley: The hon. Gentleman misunderstands the nature of tax relief. If banks or other companies fail to make a profit, they do not pay tax. No money is handed out by the Treasury to them, and therefore there is no money available that is now going to them that could instead go to underdeveloped countries.

Mr. Redwood: To ask the Chancellor of the Exchequer what responses he has received to his 1987 initiative to deal with the problem of developing countries' debt.

Mr. Lawson: My initiative has been widely welcomed. Many countries have followed the United Kingdom's lead in converting past aid loans to grants and the Paris Club has agreed to several extended reschedulings of official debts. I am continuing to press for interest rate reductions


on such reschedulings. Following my initiative, the managing director of the IMF launched a separate proposal for interest rate assistance with these countries' multilateral debts via an expansion of the fund's structural adjustment facility.

Mr. Redwood: While welcoming the excellent initiative of the Chancellor, may I ask him whether he agrees that the World Bank and the International Monetary Fund should go much further in expediting progress in this area by themselves writing off and making adequate provisions against the debts which they are putting on their books at unrealistic levels?

Mr. Lawson: I think that the international institutions, which are backed by Governments, are in a very different position from commercial banks, which have to make sure that, if there are bad or doubtful debts, provision is properly made for them. It is, indeed, a matter of importance to the supervisory authorities in this country and other countries to ensure that that is done. I welcome what the commercial banks have been doing in this regard.

Mr. Skinner: Is not the truth of the matter that in this financial year the amount of money that will be set against income tax relief in respect of the four main banks in Britain will be of the order of £1,000 million? Will the right hon. Gentleman also confirm that in the next financial year it is proposed that those debt provisions will rise even beyond that figure? Since the British public is of the view that we ought to be helping Third world countries, would it not make sense for the Chancellor of the Exchequer to allow money to go to Third world countries to bail them out, instead of bailing out the British banks?

Mr. Lawson: I am sorry that the hon. Gentleman has wasted the time of the House by asking precisely the same question, based on precisely the same conception as his hon. Friend the Member for Workington (Mr. Campbell-Savours) asked, and which was answered by my hon. Friend the Economic Secretary. If a bank lends money to any borrower, whether an industrial customer or an overseas sovereign Government, and it turns out to be a bad debt, obviously there is tax relief on the bad debt. That is the law of the land. Equally, if, at the end of the day, the debt is paid, the tax relief in unwound.

Oral Answers to Questions — PRIME MINISTER

Military Hospitals (Departmental Co-ordination)

Mr Jessel: To ask the Prime Minister if she is satisfied with the co-ordination between the Secretaries of State for Defence and for Social Services concerning the use of beds in military hospitals for National Health Service patients.

The Prime Minister (Mrs. Margaret Thatcher): Yes, Sir. Some 34,000 National Health Service in-patients, 4,000 day patients and 200,000 out-patients are treated annually in military hospitals in the United Kingdom. Ways of increasing the number of National Health Service patients treated in military hospitals are being considered by my right hon. Friends.

Mr. Jessel: As the hospitals of the Royal Navy, the Army and the Royal Air Force, which have excellent standards, now take 34,000 National Health Service inpatients every year and could take very many thousands

more—on 6 January they had 495 beds available —will my right hon. Friend please urgently consider how they can take more? In particular, will she please consider whether waiting list money can be further applied?

The Prime Minister: I am very much aware of my right hon. and hon. Friend's concern to see that we get as much health care out of the facilities as we possibly can. The ordinary health authorities can apply for waiting list money if they know of beds which are free in military hospitals and can made an arrangement for patients to be treated there, so we are going in the direction required by my hon. Friend.

Mr. Cryer: Does the Prime Minister agree that the armed forces could provide more beds for National Health Service use and, indeed, provide facilities for the National Health Service—which is being cut back under her Government—if she adopted different priorities and shifted the £11 billion she is spending on nuclear weapons in the form of Trident to the National Health Service? In that way the continuing complaints about operations not being carried out would be brought to an end and we could spend money on patient care, instead of on mass extermination.

The Prime Minister: The National Health Service is not being cut back. Over and above inflation, there has been provision for an extra 30 per cent. for the National Health Service. The hon. Gentleman might have got muddled up with the record of his own Government, who, 10 years ago, cut back the National Health Service, and who also cut in real terms nurses' and doctors' pay. Under this Government, the money has gone up, the number of nurses and doctors has gone up and the pay has gone up.

Mr. Speaker: Order. The question is about beds in military hospitals.

Sir Michael Shaw: Does my right hon. Friend agree that the limitation on the number of National Health Service patients dealt with by the services has been caused by a long-running wrangle between the Ministry of Defence and the DHSS? We on the Public Accounts Committee have been assured that that wrangle will reach a satisfactory conclusion by 31 March. Has that same assurance been given to my right hon. Friend?

The Prime Minister: As my hon. Friend heard, 34,000 National Health Service in-patients are being treated by military hospitals, as are a lot of day patients and outpatients. I can assure my hon. Friend that health authorities are being encouraged to consider every possibility, including military hospitals, when putting in their bids for allocations from the waiting list fund. In view of my hon. Friend's question, I shall make further inquiries to ensure that what he wants is happening.

Engagements

Mr. Nellist: To ask the Prime Minister if she will list her official engagements for Thursday 14 January.

The Prime Minister: This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today.

Mr. Nellist: With Matthew Collier critical, Matthew Mulhall and Adrian Woolford of Coventry still waiting,


when the parents of the 90 bairns in the Midlands desperately waiting for life-saving heart surgery come to London on Monday afternoon to present to No. 10 petitions with over 50,000 signatures, will the Prime Minister meet them personally, or will she be too frightened to explain to them which children will live and which will not?

The Prime Minister: I shall not meet them personally. [HON. MEMBERS: "Shame"] I remind the hon. Gentleman that that particular hospital was designated a supra-regional centre only in 1984, under a Tory Government, and since then over 560 open heart operations have been performed. There are vastly more open heart operations performed now than there used to be, and some 3,000 babies survive now who would not have survived eight years ago.

Mr. Atkinson: To ask the Prime Minister if she will list her official engagements for Thursday 14 January.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Atkinson: Is my right hon. Friend aware that the first phase of the new Bournemouth general hospital in my constituency is due to be opened later this year? Is she also aware that that hospital was planned to be built 10 years ago but that, like so many others, it was a victim of Labour's incompetence in government, which brought the country to the brink of bankruptcy? Should we not be reminded more frequently of the chaos and cuts in the NHS under the Labour Government?

The Prime Minister: Yes. The Labour Government not only cut the capital programme for hospitals, but, as I have said, cut nurses' and doctors' pay in real terms. The NHS has expanded enormously under us, as has the capital programme, and the number of nurses, the number of patients treated, both in-patients and out-patients, and the number of treatments have gone up.

Mr. Kinnock: Will the Prime Minister tell us why she opposes the Protection of Official Information Bill of her hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), or is it a secret?

The Prime Minister: For the reasons that have already been given in the House and elsewhere, because of the great complexity of the matter, because of the Government's responsibility for such matters and because we are considering a White Paper with a view to bringing forward a Bill. It is vital that this matter is dealt with by a Government measure.

Mr. Kinnock: Is not it obvious that the Prime Minister's case is weak and that is why she has to Whip? In any case, the Prime Minister knows very well that the full facilities of the Government could so easily be put at the disposal of the hon. Member for Aldridge-Brownhills as he takes the Bill through the House, so her excuses are absurd. When even her right hon. and hon. Friends describe her attitude to and tactics on the Bill as "monstrous", "dangerous", "a political SAS" and as the tactics of the gulag, is it not obvious that her response has nothing to do with state security, and everything to do with a shallow, spiteful and spurious attitude?

The Prime Minister: We believe that a private Member's Bill is not the appropriate way to secure changes in this difficult and sensitive area affecting the nation's

security, especially when a revisionary Bill affecting section 2 of the Official Secrets Act started its journey in the other place in 1979 but did not secure passage there. I remind the right hon. Gentleman that we need no lessons in security from him.

Mr. Gardiner: Will my right hon. Friend today confirm that the purpose of the National Health Service is not to further the interests or feather the nests of COHSE and NUPE? Will she further confirm that the purpose of open tendering is to secure more resources for the Health Service to devote to patient care? Will she therefore condemn these foolish strikes?

The Prime Minister: I obviously confirm what my hon. Friend has said. The purpose of the National Health Service is to bring more care to the patient. We are enabling treatments to be brought to the patient which were not available some years ago. We all regret any strikes. They are strikes at the expense of the patients, and I hope they will be condemned on both sides of the House.

Mr. James Lamond: To ask the Prime Minister if she will list her official engagements for Thursday 14 January.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Lamond: Is the right hon. Lady aware that the Manchester royal infirmary is facing its greatest crisis in 200 years? It is having to issue warnings to its employees that it may not be able to pay their wages. Why does she continue to suggest that the only solution to this problem lies in increasing income tax, when she knows very well that her right hon. Friend the Chancellor of the Exchequer has billions of pounds in his pocket ready to be paid out in income tax cuts? A fraction of those cuts placed at the disposal of the National Health Service would remove fears from people, young and old, who are concerned for the future.

The Prime Minister: My right hon. Friend has already made more resources available to the National Health Service this year, and next year about £1·1 billion extra will be made available out of the taxpayers' pocket. Next year, the average family will pay £1,600 to the National Health Service. That is a considerable amount. We are trying to see that full value for money is obtained from that.
There are vast differences in efficiency between hospitals and between the ways in which the money is used, and our duty is to get the best value for money out of the resources that go into the Health Service.

Mr. Harry Greenway: To ask the Prime Minister if she will list her official engagements for Thursday 14 January.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Greenway: Will my right hon. Friend confirm that the Conservative party remains the only party firmly committed to the modernisation of the British nuclear deterrent through Trident, given that the commitment of the Social and Liberal Democrats to that lasted all of three hours?

The Prime Minister: I confirm that we are firmly committed to modernising the independent nuclear


deterrent with Trident. For one fleeting moment, I thought that we might be joined by another party, but apparently, as soon as it had a policy, it withdrew it.

Mr. Salmond: Does the Prime Minister recall the pledges freely given by the Chancellor of the'Exchequer to the House on 31 March 1982 on "Britoil's crucial independence"? When will those pledges be honoured?

The Prime Minister: My right hon. Friend the Chancellor made a statement this week on his attitude to using the golden share in Britoil. That statement stands.

Mr. Leigh: When my right hon. Friend next meets or talks to her colleagues who are Heads of European Governments and receives their congratulations on becoming the longest-serving Prime Minister this century, will she remind them, as diplomatically as only she knows how, that she would certainly not have remained Prime Minister for so long, or even have become Prime Minister, if she had proposed as loopy a suggestion as that we should tax the clothes we give our children, the books they read and the food that we give them to eat? Will she remind them that one would need to have monumental hubris to expect to survive in political life by proposing such measures?

The Prime Minister: I am grateful to my hon. Friend. The undertakings that we gave on this matter during the election — not putting VAT on food or children's clothing — stand in full, of course. Again, for one moment, I thought that another party might have a policy like that, but I quickly understood that it had not.

Mr. Callaghan: To ask the Prime Minister if she will list her official engagements for Thursday 14 January.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Callaghan: Is the Prime Minister aware of the report last week that, under the 30-year rule, the file on Hugh Gaitskell had been embargoed? Does that have any connection with the allegation in "Spycatcher" that the former Leader of the Labour party was assassinated?

The Prime Minister: That file was withheld in accordance with rules which are understood by the whole House and in precise accordance with some of those rules. It has been withheld for those reasons. [HoN. MEMBERS: "Why?"]

Mr. Speaker: Order.

Mr. Devlin: During her busy day, will my right hon. Friend take time to consider the situation in my constituency? Does she agree that parents of children in Cleveland are no different from parents in any other part of the country and that consequently, although at the end of the inquiry we may take individual measures, we should seek to reform the law relating to children and parents generally?

The Prime Minister: I take note of the point made effectively by my hon. Friend.

Mr. Roy Hughes: To ask the Prime Minister if she will list her official engagements for Thursday 14 January.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Hughes: Does the Prime Minister recall the famous words in which she suggested that the National Health Service was safe in her hands? In view of the perpetual crisis in the service over recent months and the tragic cases that have been highlighted in the press, will she now recognise that many people throughout the country believe that she has blood on those hands?

The Prime Minister: I am happy to inform the hon. Gentleman that for every five in-patient cases treated in 1979, six were treated this year. For every 10 out-patient cases, 11 have been treated this year. For every one heart bypass operation in 1978, there have been three this year. For every three hip replacement operations in 1978. there have been four this year. For every two cataract operations in 1978, there have been three this year. For every two cervical smear tests in 1978, there have been three this year. For every two chronic renal failure treatments in 1978, there have been five this year. 'That is a splendid record of success.

Business of the House

Mr. Neil Kinnock: May I ask the Leader of the House to state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. John Wakeham): Yes, Sir. The business for next week will be as follows:
MONDAY 18 JANUARY—Second Reading of the Criminal Justice Bill [Lords].
Motions on the Rate Support Grant (Scotland) (No. 3) Order and the Revaluation Rate Rebates (Scotland) Order.
TUESDAY 19 JANUARY—Opposition Day (7th Allotted Day). There will be a debate on an Opposition motion entitled "The Current Crisis in the National Health Service".
Motions relating to Scottish rating and valuation regulations. Details will be given in the Official Report.
WEDNESDAY 20 JANUARY—Debate on motion to take note on the White Paper on the annual report on Hong Kong 1987 (Cm. 293).
Motion on the Food Protection (Emergency Prohibitions) Order
The Chairman of Ways and Means has named opposed private business for consideration at Seven o'clock.
THURSDAY 21 JANUARY — Second Reading of the Firearms (Amendment) Bill.
Remaining stages of the Duchy of Lancaster Bill.
FRIDAY 22 JANUARY—Private Members' Bills
MONDAY 25 JANUARY—Second Reading of the Regional
Development Grants (Termination) Bill.
[Documents for debate on Tuesday 19 January:
Non-Domestic Rates and Community Charges (Timetable) (Scotland) Regulations 1987 (S.I., 1987, No. 2167); Abolition of Domestic Rates (Domestic and Part Residential Subjects) (Scotland) Regulations 1987 (S.I., 1987 No. 2179).]

Mr. Kinnock: I am grateful to the Leader of the House. I congratulate him on his additional appointment, although I am sure that all hon. Members will regret the reason why that additional office had been thrust upon him.
Now that the Secretary of State for Social Services has conceded to the presidents of the royal colleges that it is necessary to increase "total resources", to use the Secretary of State's words, and the efficiency of their use in the National Health Service, can we look forward to further candour from the right hon. Gentleman during the Opposition day on the Health Service next week? Can we look forward to, for instance, the announcement of further funds which are essential if hospitals are to clear the £70 million-worth of deficits which still remain in this financial year and which must be lifted if the next financial year is not to begin with another under-funding crisis in the NHS?
Yesterday the Secretary of State for the Environment confirmed in a written answer that he had asked the Nature Conservancy Council to examine the scope for the privatisation of the nation's natural reserves. May we now have an urgent debate on the Government's intentions towards conservation and the future of the national heritage? Clearly, nothing is safe from the Government's predatory instincts, not even our countryside.
Given that this week we have seen yet a further erosion of the Government's support for firms involved in high

technology, may we have a statement on policy for industrial research and development which will explain exactly how the Government propose that withdrawing assistance from innovation will somehow advance those industries on which our future as a nation depends, especially when our competitors are doing the opposite and giving more support to their advanced industries?
The House will have noticed the gravity of the threat posed by the massive increase in illegal imports of cocaine. May we have a statement on what the Government intend to do about this and whether they will recruit the 500 extra customs staff that are estimated to be necessary to deal with this murderous traffic?
Finally, will the Leader of the House now tell us when the House will have an opportunity to debate the televising of the House of Commons? Can he also tell us whether he is willing to cast off his coyness and join those of us who want this change and want it quickly?

Mr. Wakeham: First, I thank the right hon. Gentleman for his remarks at the beginning and say that I am sure the whole House is sad that Lord Whitelaw has had to retire from active politics. We all wish him a continued and speedy recovery, which is going on at present. [HoN. MEMBERS: "Hear, hear."]
With regard to the other matters that the right hon. Gentleman raised, of course the debate next week will enable my right hon. Friend to make quite clear the position regarding funding of the National Health Service. As I understand it, the meeting with senior medical gentlemen that took place yesterday was to discuss the way that the increase in funding that had already been announced was going to assist the NHS and continually improve its record.
With regard to the Nature Conservancy Council, as I understand it too—but I will check the matter with my right hon. Friend — a period of consultation and discussion is still going on, but I will see when is the most appropriate time to have a debate. It is obviously a very important matter that we shall have to come to in the House.
With regard to research and development plans, it is not right for a statement to be given at the moment, but many of the issues raised are just the sort of issues, subject to you, Mr. Speaker, that could well be part of the debate on the Regional Development Grants (Termination) Bill that will take place on 25 January.
On the question of cocaine and drugs generally, I will certainly refer the matter to the Home Secretary, but I have nothing to say at the moment.
I am sorry that I have not been able to announce today the date of the televising debate, as I had intended to do; but I can undertake to announce a date in my next business statement next week. I am anxious to have a debate at the time I said—around the end of the month. I think that the right hon. Gentleman will have to wait, if it is of any concern to him, for the views that I shall express on that day.

Sir Bernard Braine: The Leader of the House will know that the issues relating to abortion are often emotive. I hope that he will agree that a private Member's Bill that has secured time for debate on the Floor of the House will be enabled to be discussed fully for the House to arrive at a conclusion. I ask my right hon. Friend, therefore, whether he will give an undertaking


that, if any attempt is made to prevent a proper debate on Friday week, he will ensure that the House is given an opportunity to reach a decision on this most grave and important matter?

Mr. Wakeham: I of course recognise my right hon. Friend's concern in the matter, although the point that he raises is hypothetical at present. I hope very much that it will not become a reality. However, I am sure that the House would wish to protect private Members' time if the chance to reach a decision on the Bill were threatened by the use of procedural devices.

Mr. Archy Kirkwood: Will the Leader of the House confirm that the announcement that he has made about the motions relating to Scottish rating and valuation on Tuesday night arises on a prayer that has been tabled in the name of my right hon. Friend and hon. Friends? If that is the case, may I warmly welcome the fact that these important regulations on poll tax implementation can be discussed? The opportunity to do so will be widely welcomed.
Has the Leader of the House yet had time to assimilate the results of the debate that we had only last night on the setting up of a Select Committee on Scottish Affairs? May we expect a statement and debate in the near future so that the Committee may be set up and start working on important issues north of the border?

Mr. Wakeham: I use the word "friend" with some care in these matters, but certainly the hon. Gentleman sitting on the hon. Member's left, the hon. Member for Orkney and Shetland (Mr. Wallace), wrote to me on these matters and I confirm that it was what I take to be the hon. Gentleman's hon. Friends who tabled this prayer that will be the subject of the debate next week.
As regards last night's debate, I was pleased to see the more flexible stance taken during the debate. The next thing is to read Hansard and see exactly what everyone's position is. Then we will decide how best to proceed from there.

Sir Anthony Grant: Has my right hon. Friend had an opportunity to study early-day motion 372 in the name of my hon. Friend the Member for Wokingham (Mr. Redwood)?
[That this House believes that honourable and right honourable Members should keep their speeches to 10 minutes or less when requested by Mr. Speaker in order to give more backbench Members of all parties an opportunity to speak, excepting only the four principal speakers in each debate.]
Will he consider, in conjunction with Mr. Speaker, the possibility of reintroducing the experiment which was very successful in the last Parliament, because any restraint on the length of speeches by windbags, especially Privy Council windbags, would be very welcome?

Mr. Wakeham: I have a great deal of sympathy with my hon. Friend. The intention is to get agreement to change Standing Orders to make this a permanent feature, but it is one of a number of procedural changes that we are considering, and I will make progress as soon as I can.

Mr. Dick Douglas: Will the Leader of the House reflect a little on what he said in reply to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) about the Select Committee on Scottish Affairs? Will he concede that the initiative lies in his hands

and that, while the Committee of Selection could theoretically take certain steps, he should take the initiative and put down a motion to get the Select Committee established? Since Opposition Members have shown flexibility, is it not his responsibility, in keeping with his duties as Leader of the House, to take the initiative and put down a motion as soon as possible?

Mr. Wakeham: I recognise that the Committee of Selection is awaiting further guidance but, as I said to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), I was pleased to see the flexible stance taken by the hon. Member for Glasgow, Garscadden (M r. Dewar). If that had clearly been the Labour party position earlier on, the Committee of Selection would not have needed to report in the terms that it did. Once we have studied last night's debate in Hansard, it will be a question of proceeding to discussions.

Sir Ian Lloyd: My right hon. Friend will be aware that, in the exceptionally interesting and wide-ranging paper on the reorganisation of the Department of Trade and Industry published yesterday, there is a proposal that part of the Department should be restructured so that it could play a full part in assessing the contribution which science and technology could make I o the economic success of the nation. Does my right hon. Friend not agree that not only the DTI but also this House should have an opportunity to make such an assessment? Is such an assessment not long overdue?

Mr. Wakeham: I agree with my hon. Friend that discussions on matters of science and technology acre something for which he has been pressing me for some time. He puts it in a slightly different way, but I recognise the validity of his case. It is an important matter, but I hope that my hon. Friend will also appreciate that at this time in the Session there is a considerable amount of important Government business to deal with, so I cannot offer him time for that in the immediate future. I will, however, bear it in mind and, as soon as we have a bit more scope, we will do something about it.

Mr. Jack Ashley: Is the Leader of the House aware that the Cabinet papers just released under the 30-year rule show that, at the British nuclear tests in the Pacific, no high-level consideration was given to the safety of our service men, and the chiefs of staff admitted that they were dealing with an unknown quantity? As British nuclear test veterans have still received no compensation, could we have a debate on the matter as soon as possible?

Mr. Wakeham: I appreciate the right hon. Gentleman's concern, but I cannot promise him an early debate on the matter.

Mr. John Hannam: My right hon. Friend will be aware of the Home Secretary's announcement that a White Paper on the reform of the Official Secrets Act will be produced in June. Can he assure the House that we shall have the opportunity of a full debate on this important subject before the summer recess?

Mr. Wakeham: Yes, I can confirm that my right hon. Friend the Home Secretary hopes to lay before Parliament in June a White Paper on the reform of section 2 of the Official Secrets Act, and I can assure my hon. Friend that the House will be given an opportunity to debate it before the summer recess.

Mr. David Winnick: Is the Leader of the House aware of increasing concern that the Murdoch group is to take a larger stake in the Pearson group, so that the Financial Times could come under the control of Mr. Murdoch? Will the Leader of the House recognise that it would be completely wrong for that gentleman to own even more of the British press, and will he promise a statement early next week if necessary?

Mr. Wakeham: As the hon. Gentleman knows, clear rules are laid down governing mergers and takeovers of newspapers. I assure him that my right hon. and noble Friend the Secretary of State for Trade and Industry will conduct himself entirely in accordance with those rules and that a statement will be made if one is required.

Mr. Patrick Thompson: Bearing in mind the request made by the Leader of the Opposition for an early debate on the televising of Parliament, does my right hon. Friend agree that the scant respect for the great traditions and values of the House of Commons shown by many Opposition Members will do nothing to advance the cause of an early debate or, indeed, of the televising of Parliament?

Mr. Wakeham: Regardless of whether it advances the cause of an early debate, it is certainly a factor that a number of my hon. Friends will want to consider in their deliberations on these matters.

Mr. James Lamond: Will the right hon. Gentleman keep in mind the fact that he is the Leader of the whole House, including Back Benchers? Does he realise that, if he is to keep the kind regard that many hon. Members have for him, he must be careful to prevent incidents such as the recent placing of a two-line Whip on the Felixstowe Dock and Railway Bill, which was a private measure, and of a three-line Whip against a private Member's Bill sponsored by one of his hon. Friends? In addition, he gave a rather curt reply to last night's debate—he has certainly softened a little this afternoon — which also infringed the rights of Back Benchers who want to be part of the Select Committee on Scottish Affairs. Such incidents do not build up the support that is necessary if the right hon. Gentleman is to follow in the great traditions of his predecessors.

Mr. Wakeham: I know that my immediate predecessor was a hard act to follow and I shall do my best to serve the House in all capacities. However, the hon. Gentleman has not got his facts right on the earlier matters to which he referred, and that rather devalues his contribution. Matters of whipping are not matters for me or matters for discussion. I had a very few minutes in which to reply to the debate last night. I believe that we had a useful and satisfactory debate and that the way in which I proceeded will meet with the general satisfaction of the House.

Mr. Robert Adley: Is my right hon. Friend aware that every year, immediately before our debate on Hong Kong — my right hon. Friend announced this year's debate today—the Hong Kong media seem to regard it as necessary to whip up massive expectations of world-shattering announcements about to be made by the British Government. Will he make it quite clear that this is a routine annual debate, albeit an important one, and anybody expecting dramatic announcements from the Government as a result of it is likely to be disappointed?

Mr. Wakeham: The debate is likely to take up about half of a normal sitting day. As I know nothing of the speech that my right hon. and learned Friend the Foreign Secretary will make, I do not know of any special announcements.

Mr. Frank Haynes: Is the Leader of the House aware—[AN HON. MEMBER: "Can't hear."] Shut up. I apologise, Mr. Speaker. Hundreds upon hundreds of my constituents suffer from problems caused by mining subsidence and many of his hon. Friends have similar problems in their constituencies. The reason is that British Coal will not meet the costs of compensation or repairs to those properties but keeps wiping them to one side. Will the Leader of the House arrange for a debate before Easter so that something can be done to help those people?

Mr. Wakeham: Matters of dispute with British Coal are primarily matters for its management. I shall look into the matter and if there is anything that my right hon. Friend the Secretary of State for Energy or I feel requires a debate, we shall see what can be done.

Mr. Keith Raffan: My right hon. Friend may be aware that the Welsh Affairs Select Committee has decided to meet more frequently in Wales. Will he look into the possibility of the Welsh Grand Committee meeting in Wales—thus following the example of the Scottish Grand Committee, which meets at least twice a year at the Royal High school, Edinburgh—so that we can be more accessible to the Welsh people?

Mr. Wakeham: I do not have strong views about that matter, but all that I can recall is that the meetings of the Scottish Grand Committee cause me enough trouble, without adding to it. However, I shall see what can be done.

Mr. Alex Salmond: Will the Leader of the House allow time in the near future for a full debate on the Government's golden share in Britoil so that the House can determine whether it was misled by the Chancellor of the Exchequer on 31 March 1982, when he spoke of the golden share as being an effective means of protecting Britoil's independence?

Mr. Wakeham: I do not have anything to add to what the Chancellor of the Exchequer said in answer to a private notice question earlier this week. If the matter requires a debate, we shall consider that when the time is right.

Mr. Michael Fallon: Does my right hon. Friend agree that it is hard enough to find out what is going on in this place without the difficulties posed by the non-appearance of the Order Paper in its proper form and its haphazard distribution around the outbuildings? Will he undertake to see whether the Order Paper and the Votes and Proceedings can be printed properly, in their full form and according to their normal schedule?

Mr. Wakeham: I recognise that there have been some difficulties—there were some today—and I apologise to my hon. Friend and the rest of the House for that. We are doing everything that we can to ensure that they do not recur, and I shall report to the House if anything needs to be said.

Mr. Max Madden: Does the Leader of the House understand that there is considerable concern in all parts of the House at reports that the Government intend to abolish the rights of Members of Parliament to


make representations directly to Ministers on immigration matters? Will he therefore arrange for an early statement from the Home Secretary so that he can be questioned on the Government's intentions in this matter? Will he ensure that the debate that is due to take place the week after next about the immigration rules is given sufficient time to enable all hon. Members to raise the issue of their ability to make representations directly to Ministers on immigration matters?

Mr. Wakeham: I can confirm that I shall be announcing a debate on these matters in my next business statement. That will be the occasion to deal with the points that the hon. Gentleman has raised. I shall ensure that there are discussions through the usual channels to ensure adequate time for that debate.

Mr. William Powell: When my right hon. Friend reflects on last night's debate about the setting up of the Select Committee on Scottish Affairs, will he bear in mind the two themes that emerged—that there should be such a Select Committee and that its conduct in the last Parliament was widely thought to be unsatisfactory? Is there not an obvious answer to the problem — the Committee of Selection should nominate only those hon. Members who do not serve Scottish constituencies?

Mr. Wakeham: My hon. Friend adds a novel twist to an already fairly complicated position.

Mr. Greville Janner: When can we have a debate on the special needs of special schools such as Western Park school in my constituency, where the combination of the reductions in funds for education and for health have combined to make life extremely difficult for the people who are trying to care for those children and for the youngsters themselves, especially in physiotherapy?

Mr. Wakeham: Subject to you, Mr. Speaker, it seems that some of the points that the hon. Gentleman wishes to make could be made in the debate next week.

Mr. Eric Forth: Has my right hon. Friend had time to consider the serious events in the Chamber on Monday? Is he aware that the hon. Member involved in the incident announced on radio the same day that, because of the short term of his suspension from the House, he proposes, if necessary and as he sees fit, to repeat the episode? Therefore, will my right hon. Friend allow an early debate on the procedures of the House, particularly on the disciplinary measures available to the Speaker, in order that any repetition of such an event is met with much more harsh discipline than was the case on Monday?

Mr. Wakeham: If there were a strong demand for a debate, I would look into it. The position was pretty clear earlier in the week, and I think all hon. Members hope that we do not have a repetition of that sort of thing.

Mr. Andrew Faulds: May I add my congratulations to the right hon. Gentleman, for whom I have had the warmest regard over many years, since we first travelled abroad together? I know him better than most. When can the right hon. Gentleman arrange that we should have a chance to debate foreign affairs again, because there are a number of very important issues that many of us would like to examine, such as the appalling conduct of the Israeli Government and its army in the middle east, the developments in central America and the

continuing appalling situation in South Africa? Does he agree that these are all major matters that the House should be considering fairly soon?

Mr. Wakeham: The high regard of which the hon. Gentleman spoke is reciprocated, but that does not mean that I can find an extra day in an otherwise crowded programme in the next few weeks to debate foreign affairs. It is certainly an important subject and we will have to have a debate before long, but it will not be in the immediate future.

Mr. John Wheeler: Does my right hon. Friend agree that it is welcome news that the Treasury will authorise the minting of a £2 coin next year? Nonetheless, will he agree to a debate on the nature of the denominations of coins to be minted and issued and the design to be imposed upon them?

Mr. Wakeham: A special tercentenary coin will be minted. I recognise that a debate on the subject may be more interesting and enlightening than some debates we have, but I do not think that I can promise a debate on that subject in the immediate future.

Mr. Alistair Darling: Would the Leader of the House find time to debate the patronage and appointments by Ministers? I am thinking of the Lothian health board, where appointments have been systematically removed and replaced by card-carrying members of the Conservative party. When I was speaking to the board in Edinburgh this morning, one of them openly spoke of himself as being an agent of the Minister. That is unacceptable and cannot go on.

Mr. Wakeham: I obviously cannot comment on the particular case the hon. Gentleman raises. My impression, after a few years as Patronage Secretary, is that suitable candidates from whatever political party are hard to find for many jobs in public life. It would be more constructive for all of us to put forward suitable candidates than to criticise those who put themselves forward for public service.

Mr. Richard Holt: Will my right hon. Friend, notwithstanding next week's Opposition debate on the Health Service, seek to bring a Minister here to make a statement on the current position over meningitis? This is causing great anxiety and many hon. Members are surprised that a Minister has not already come to the Dispatch Box to air the Government's position on the subject. Will my right hon. Friend look into it?

Mr. Wakeham: I certainly recognise that this important subject is giving concern. I will refer the matter to my right hon. Friend to see whether any statement would be appropriate.

Mr. Gerald Bermingham: Would the Leader of the House take time to persuade his right hon. Friend the Chancellor of the Exchequer to come to the Dispatch Box, because today on two occasions a Treasury Minister and the Prime Minister were pressed on comments made in Europe by Lord Cockfield on the extension of VAT? This afternoon we have received assurances on fuel oils, children's clothes, food, and so on, but it is remarkable that we have not received such an assurance on books and newspapers. Perhaps the Leader of the House can persuade the Chancellor to reassure us that there are no proposals to impose VAT on books and newspapers.

Mr. Wakeham: I am grateful to the hon. Gentleman for his question. I assure him that I can deliver my right hon. Friend the Chancellor very shortly, but what he will say is a matter for him, not for me.

Mr. Phillip Oppenheim: Could my right hon. Friend find time for a debate on the tremendous damage being done to democracy by the sight of the squalid squabbling among the various factions of the alliance? Is it not true that, when the alliance was formed, its members told us that they would promulgate a new type of consensus politics? Is it not becoming apparent that it is not consensus politics that they are pushing forward, but nonsense politics?

Mr. Wakeham: I shall not delve too far into those waters. I shall merely say that I understand that the squabbling is not about how to divide up the Short money.

Mr. Peter L. Pike: Does the Leader of the House recognise that there is considerable concern about the possible extension of privatisation to the provision of leisure and recreation services by local authorities? Will he give the House an assurance that, if the Government are tempted to move in that direction, the subject will be fully debated in the House, and not sneaked through and added to the Local Government Bill by other means?

Mr. Wakeham: I have no doubt that any proposals from my right hon. Friend the Secretary of State for the Environment would be well worthy of debate in the House, and that he would welcome an opportunity of explaining his views. However, I do not think that I can add anything to the answer that I gave to the Leader of the Opposition.

Mr. David Nicholson: Will my right hon. Friend consider finding time for a debate on the report from the Foreign Affairs Select Committee on cultural diplomacy? Is he aware of the concern on both sides of the House about the funding and the administration of the British Council, which is so important to our influence and our exports abroad?

Mr. Wakeham: That is an important matter, and the report by the Select Committee is also important. However, I am afraid that the pressure of time is such that I cannot offer any prospect of a debate in the immediate future.

Mr. Pat Wall: As the Leader of the House has already said that changes are to be proposed in the rights of hon. Members to represent their constituents in immigration cases, can he ensure that a statement is made in the House next week — the week before the debate? This is yet another attack on the rights of hon. Members to represent their constituents.

Mr. Wakeham: I am not sure that the hon. Gentleman's analysis of the position is accurate. The reason that we are having a debate not next week but the week after is that that was found to be more convenient for both sides of the House.

Mr. Tony Marlow: Following the very eloquent question from my hon. Friend the Member for Mid-Worcestershire (Mr. Forth), may I make a strong demand of my right hon. Friend that we should have a debate on that subject? My right hon. Friend will be aware that, on Monday, a hitherto totally unknown Member of the House, whom no one had clapped eyes on

before, managed by appalling behaviour to get himself ejected from the premises and projected immediately on to our television screens.
This bad behaviour is increasing. Surely, if someone wants to be a martyr, there should be at least a little penalty; a little risk; a little bit of pain. If people want to be burnt at the stake on the Floor of the House, would not my right hon. Friend agree that at least they should pay for the faggots, or even a box of matches? If anyone is suspended from the House in future, surely he should lose his pay at the time when he is suspended.

Mr. Wakeham: I recognise the strength of my hon. Friend's argument, and I would guess that many other people think like him. However, I think that such measures would be controversial. It is a matter for the House and, as I have said, if there is a strong wish to debate it, I shall see what I can do. We should, however, take account of the fact that any hon. Member who has been suspended from the House is not relieved of all his constituency duties. Such matters, of course, would also have serious implications for you, Mr. Speaker.

Miss Marjorie Mowlam: Can the Leader of the House clarify his response to a question put earlier by the hon. Member for Havant (Sir I. Lloyd) about the chance of an early debate on the Department of Trade and Industry? It is very important to many companies interested in investing in the north-east, particularly with inward investment, to know what grants are available for the future.

Mr. Wakeham: What I said was that I thought that many of the points of substance in the report could well be debated on Monday, 29 January, on the Second Reading of the Regional Development Grants (Termination) Bill.

Mr. Patrick McLoughlin: Could my right hon. Friend find time next week, or in the very near future, for a debate on the conduct of local government? Is he aware that Derbyshire county council recently appointed Mr. Reg Race as its county director, on a salary in excess of £40,000, when his only qualification for the job seems to be that he is a former Labour Member of Parliament? Does my right hon. Friend agree that that is disgraceful and an abuse of local government, and if no debate is forthcoming, should we not consider the possibility of a Bill to outlaw such action?

Mr. Wakeham: I cannot promise a debate in the immediate future. While I have no wish to suggest any difficulties for Derbyshire, I am quite content that Mr. Race is where he is.

Mr. Nigel Griffiths: Will the Leader of the House give an early opportunity for a debate to reform the planning legislation that is allowing developers to build on green belt, green field and playing field sites in Marchmont, Morningside and Liberton in my constituency, and on similar sites in many other constituencies up and down the country?

Mr. Wakeham: Obviously I do not have the details, but I shall certainly refer the matter to my right hon. and learned Friend the Secretary of State for Scotland.

Mr. Bill Walker: Has my right hon. Friend noticed the growing tendency within some sections of the Scottish media to report matters that cannot be


reported in England? If so, will he confirm that the matter can be debated in tomorrow's debate? If it is not raised tomorrow, will it be included in the Government's thinking in their White Paper on these sensitive and delicate matters?

Mr. Wakeham: What will or will not be in order in tomorrow's debate is not a matter for me. However, I should have thought that my hon. Friend, with the skill that he shows in such matters, might be able to make some of the points that he wants to make in principle.

Mr. Tam Da!yell: Has the Leader of the House reflected on early-day motions 228, 253, 272, 273 and 286?
[That this House notes that in the book, Campaign, By Rodney Tyler, the Selling of the Prime Minister; from behind the doors of Downing Street and Conservative Central Office—A unique inside account of the Battle for Power, the author on page 1, chapter 1, paragraph 1, sentence 1, states 'It was an extraordinary turnaround in fortunes from the moment on 27th January 1986 when Mrs. Thatcher secretly confided to a close associate that she might have to resign …' and on page 3 that 'On the eve of the crucial Westland debate she herself felt shaky enough to doubt her future' though some around her later sought to dismiss this as late evening anxieties of the sort that had disappeared the following morning. It is certainly true that if Leon Britton had chosen to, he could have brought her to the brink of downfall, by naming the real culprits inside Number 10. Instead, he chose to remain silent, and calls on the Prime Minister to give a full account of what transpired between 3rd January and 27th January 1986, at Number 10 Downing Street, in relation to the selectively leaked Law Officer's letter concerning the Westland Affair.]
[That this House notes that the Member for Aldershot on page 136 of his book Heseltine: the unauthorised Biography, states in relation to the Westland Affair that 'John Wakeham issued an order of the day which contained the trite, if effective message, that it was time for all good men to come to the aid of the party. We did.'; and calls on the Leader of the House, The Right Honourable Member for South Colchester and Maldon, to explain when he first knew the role of the then Trade and Industry Secretary, The Right Honourable Member for Richmond, Yorks, in the matter of the disclosure of a selectively leaked Law Officer's letter.]
[That this House notes that in his book Mrs. Thatcher's Revolution, published this week by Jonathan Cape and Co., Mr. Peter Jenkins writes, on page 200 'Britton himself refused to enlighten the Select Committee on any point of substance. However, his is reputed to have told close friends subsequently that not only has she known perfectly well what had happened but that, on the day following the leak, had expressed her satisfaction to him at the way things had been handled. However at that time, the downfall of Heseltine had not been achieved … He ( Mr. Britton) might point the finger at her ( Mrs. Thatcher). Potentially he now had the power to destroy her'; and calls on the Prime Minister to give the House a full account of her conversations with the then Secretary of State for Trade and Industry, the Right honourable Member for Richmond, Yorks, over the period from 3rd January and 27th January 1986, in relation to the selectively leaked Law Officer's letter concerning the Westland Affair.]
[That this House notes that in The Thatcher Years—A decade of Revolution in British Politics, published by BBC

Books, Mr. John Cole, on page 170, considering the selectively leaked Law Officer's letter in the Westland Affair, writes 'why did he ( Sir Robert Armstrong) not give her a quick interim report when he discovered that the leak was an inside job, authorised by her Office? Why did Leon Brittan not tell her? Or the private secretary concerned? Or his chief, who sits in the same room? Or her press secretary? And why did she never ask?'; and calls on the Prime Minister to inform the House of the answers to these questions.]
[That this House notes that, in the book 'Not with Honour-The Inside Story of the Westland Scandal', on page 142, Magnus Linklater and David Leigh write that 'Instead, following Havers's complaint, she spoke privately to Brittan about the leak. Although this is something the Prime Minister has failed to disclose, to widespread disbelief, the evidence comes from an authoritative source, who told us: "The Prime Minister knew about the leak. She was pleased it had been done. There was a meeting between Brittan and her after the complaint from Mayhew. Only the two of them were present … Brittan assumed she knew of [ the leak's] origins. You must draw your own conclusions." One of Brittan's friends adds, "Nobody thought it was a problem. The complaints were out of the public domain and any inquiry was expected to be a formality. Leon wasn't worried at all about it."; and calls on the Prime Minister to give a full account to the House of the meeting between herself and Right honourable Member for Richmond, Yorks, referred to therein.]
In relation to what was said to my hon. Friend the Member for Edinburgh, Central (Mr. Darling), may I record that some of us have had nothing but courtesy from four Conservative Secretaries of State: Michael Noble, Jack Maclay, Gordon Campbell and, indeed, the right hon. Member for Ayr (Mr. Younger)? However, times have changed in Scotland, and Ministers now brutally throw people off health boards and other Government committees for the Secretary of State, which has never happened before—good Labour people who have served well.
That is partly the reason why—uncharacteristically, perhaps—for the first time ever, I have been asking questions about one of the right hon. Gentleman's colleagues, the Under-Secretary of State for Scotland—the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton)—who, absolutely without precedent, announced that he had an interest in a very controversial and contentious Bill: the Housing (Scotland) Bill. I asked whether, on Monday of next week, it would be proper for a statement to be made from the Government Front Bench —as the Selection Committee has put the ball in the Government's court—clarifying the role on the Standing Committee of a Minister who declares an interest in highly contentious legislation.
Is it proper that such a Minister should lead on, and be a major force in, such a controversial Bill? If it is considered that he should remain on the Committee, could we have a statement on whether etiquette, and, I believe. Government rules, have changed? This has never happened before in my 25 years in the House.

Mr. Wakeham: I am only prepared to answer the last part of that question. In answer to the first part, I have nothing to add to what I have said earlier. My hon. Friend the Under-Secretary himself raised his interests in the debate. He took the necessary steps to check whether he


was conducting himself in the best traditions of the House and ministerial practice, and I am sure that he is doing exactly that.

Mr. Jim Marshall: Does the right hon. Gentleman recall that, before Christmas, I asked for an early statement about Government concern regarding job discrimination in Northern Ireland and that he gave an unfavourable reply? Is the right hon. Gentleman aware that, in view of the imminent election in the United States, American politicians are coming under increased pressure to support the MacBride principles and that that would lead to further reductions in investment and perhaps disinvestment in Northern Ireland? In view of that pressure, is the Minister now prepared to ensure an early statement from the Government so that American opinion can be reassured and so that we can have further investment in the Province and ensure higher employment levels there?

Mr. Wakeham: This is obviously an important matter, and I referred it to my right hon. Friend the Secretary of State. My right hon. Friend and his colleagues spend a lot of time encouraging investment from the United States and other places. If they feel that a statement would be helpful on this matter, I am sure that they will want to make one.

Points of Order

Mr. Max Madden: On a point of order, Mr. Speaker. I wish to raise a point of order concerning the proceedings of the Standing Committee on the Immigration Bill. I gave notice of my intention to raise this matter to the Chairman of the Committee, who is in the Chamber—

Mr. Speaker: Order. I must tell the hon. Gentleman that he is not able to raise that matter in the Chamber. I also had notice of this point of order but I must tell the hon. Gentleman and the House that page 235 of "Erskine May" clearly states:
The opinion of the Speaker cannot be sought in the House about any matter arising or likely to arise in a committee".
The hon. Gentleman must make his views known to the Ministers in the usual way. I cannot help him or allow him to raise on a point of order matters currently before a Standing Committee.

Mr. Madden: Firther to that point of order, Mr. Speaker, and with great respect, can you advise me whether it would be in order for me to write to you expressing my concern about the proceedings of the Committee continuing? In that way you would have an opportunity to reflect on the matters that I wish to raise and consider whether any matter is appropriate for your consideration.

Mr. Speaker: I will certainly accept a letter, but I cannot go beyond what I have said. What goes on in a Standing Committee is not a matter for me.

Mr. Tam Dalyell: On a point of order, Mr. Speaker. I would not have bothered the House with this point of order if it had affected only myself, but it affects a distinguished retired civil servant.
You may recall, Mr. Speaker, that, in question No. 2 today to the Chancellor, I attributed a view to Sir Kenneth Clucas, a former Permanent Secretary at the Department of Trade and Industry. The hon. Member for Northampton, North (Mr. Marlow) was then called and said to the House—certainly in the hearing of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) among others—that that information had been leaked to me. Sir Kenneth Clucas retired more than five years ago and there was no question whatever of a leak. Sir Kenneth made the statement that the Prime Minister had placed Sir Robert Armstrong in a very difficult position and that it was unethical for the Cabinet Secretary to embark on an inquiry to which he knew the answer before he started. That is the public view of Sir Kenneth Clucas and it is wrong for the hon. Member for Northampton, North to say that that information was leaked.

Mr. Speaker: I do not believe that that is a matter for me. I cannot be responsible for what hon. Members say, provided they are in order.

Autumn Statement

The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move,
That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 3rd November 1987; welcomes the prospect of continuing low inflation and steady growth as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on the continuing reduction in the share of national income pre-empted by public expenditure.

Mr. Speaker: I must tell the House that a large number of right hon. and hon. Members wish to take part in the debate—no fewer than eight Privy Councillors. I do not subscribe wholly to the way in which the hon. Member for Cambridgeshire, South-West (Sir A. Grant) put his question to the Leader of the House today, but I would say to the House, and to Privy Councillors, that short speeches should be the order of the day if we are to ensure that more Back Benchers can be called. The Chair has—as yet— no authority to limit speeches to 10 minutes, but if speeches take about that time most of those on the list will be called.
I announce to the House that I have selected the amendment in the name of the Leader of the Opposition.

Mr. Lawson: The Autumn Statement debate this year is a little later than it has been in previous years. Part of the reason was to allow the Treasury and Civil Service Select Committee, which was established only on 24 November, to prepare its report. I believe that that delay was also for the convenience of the Opposition. I sympathise with the Committee's frustration that it was not constituted sooner and I congratulate my right hon. Friend the Member for Worthing (Mr. Higgins) and his colleagues on producing their report as promptly as they did.

Mr. John Smith: The right hon. Gentleman referred to the convenience of the Opposition. In case such ideas gain some currency, let me make it quite clear that we were asked whether we thought it would be a good idea for the Select Committee to report. We assented to that. That is the only way in which it was convenient to us and in that respect it was convenient to the Government and everyone else, so what is the Chancellor's point?

Mr. Lawson: I am glad that the right hon. and learned Gentleman agrees with what I said.
In my Budget statement last March I warned that:
the biggest risk to the excellent prospect I have outlined is that of a downturn in the world economy as a whole. There are still serious imbalances afflicting the three major economies—the United States, on the one hand, and Japan and Germany on the other — which, if not handled properly, could lead to a simultaneous downturn in all three. And this in turn could be exaggerated by renewed turmoil in the foreign exchange markets, whose tendency to overshoot is as notorious as it is damaging." — [Official Report, 17 March 1987; Vol. 112, c. 817.]
Recent events have brought those concerns very much to the fore, and I therefore propose to devote most of my remarks today to the prospects for the world economy —not least because this may be my last opportunity to do so before this year's Budget statement, which, I can now tell the House, will be on 15 March. The important issue of public expenditure will, therefore, be dealt with by

my right hon. Friend the Chief Secretary, when he comes to wind up this debate, if he is fortunate, Mr. Speaker, to catch your eye.

Mr. David Winnick: Before he departs from the subject of public expenditure, which apparently is to be dealt with by his colleague, does the Chancellor take on board the sort of feelings that have been expressed up and down the country in the past few months and certainly in the past few weeks, which is that, given the cash crisis in the National Health Service, if there is a choice between more money for the NHS and other essential services or continuing tax cuts, it should be the former that has priority? Does the Chancellor recognise the strength of feeling, even among Conservative voters, on that issue?

Mr. Lawson: When I appeared before the Select Committee on the Treasury and Civil Service—of which the hon. Gentleman is a mernber—I recall that he and I had a discussion on that matter. I do not propose to go into that matter any further today because I want to talk directly about the world economy. My right hon. Friend the Chief Secretary will deal with public expenditure and, in particular, I am sure that he will deal with the NHS in the course of his speech.

Mr. Nicholas Bennett: Does my right hon. Friend agree that, although the Government have cut income tax, tax yields have risen?

Mr. Lawson: That is quite correct.

Mr. Gerald Bermingham: rose—

Mr. Lawson: I cannot give way again. I recall that, a few moments ago, Mr. Speaker pointed out that a large number of right hon. and hon. Members wish to take part in the debate. I do not believe that it is fair on them if I prolong my remarks by giving way more than a limited amount of times.
I presented my Autumn Statement to the House a bare two weeks after the collapse of the world's stock markets that has come to be known as Black Monday. Apprehension about the prospects for the world economy at that time was at its most acute. It was widely predicted that the equity market collapse would inevitably lead to a major world recession this year.
Two months on, it is easier to put the sharp fall in the stock market in October into some perspective. Although the scale and suddenness of the fall were unprecedented, it has increasingly been seen as in large measure a correction, following the rapid rise in the early part of 1987. In the three main markets—London, New York, and Tokyo—following the sharp falls in October, share prices have not fallen any further since the end of that month, and are at much the same levels as a year ago. The impact on consumer spending — the so-called "wealth effect"—should therefore be limited.
But a shock such as the stock market collapse can readily damage business confidence quite severely. Most of the major countries therefore acted promptly to reduce interest rates, both to deal with the immediate risk of a lack of liquidity and to sustain business confidence. I am sure that, in the circumstances of that time, that was right.
A further reason why business confidence has remained pretty well intact is that all the economic evidence published since October, so far from implying that world recession is imminent, suggests that the world economy


prior to the stock market collapse was in fact markedly stronger than had earlier been recognised. So any slowdown there may be this year will be from a pretty vigorous momentum of growth.
It is now clear that activity picked up markedly during the course of 1987. Taking the seven major industrialised countries as a whole, output in the third quarter of the year was more than 3 per cent. higher than a year earlier, with industrial production in October more than 4 per cent. up. In the United States, industrial production in the third quarter of 1987 was 5 per cent. up on a year earlier, and unemployment reached its lowest level since 1979. Japan, the world's second largest economy, which had earlier been a little sluggish, began to move ahead briskly, with industrial production at the latest count some 8 per cent. higher than a year ago. The United Kingdom, as I indicated in the Autumn Statement, looks to have enjoyed 4 per cent. growth over last year as a whole, with again the third quarter stronger than the first two. The Canadian economy, too, is buoyant. It is only the performance of continental Europe, and particularly Germany, which remains disappointing, though even there modest growth is continuing.
Thus, overall, world growth has been proving extremely robust. However, the serious imbalances in the world economy remain.
At the heart of those imbalances lies the huge structural budget deficit in the United States. That is particularly damaging, not just because of the enormous size of the United States economy, but because the Americans, with their low propensity to save, have proved wholly unable to finance the deficit entirely from domestic savings. This means, inevitably, that the United States requires large capital inflows from overseas, with the counterpart, so long as this state of affairs persists, of a large current account deficit.
For years, there were calls for the United States to reduce its budget deficit — except, I have to say, from the Opposition Front Bench, which urged us to emulate it. But not nearly enough progress was made, not least because of the difficulty of reaching any sort of agreement between the Administration and the Congress on how to go about it. Indeed, I was interested to see that President Reagan himself said earlier this week:
That deficit is an embarrassment and a shame—most dangerous, perhaps, because it signals the complete breakdown of one of the most basic functions of the United States Government.
There has now been some encouraging progress, with the legislation passed just before Christmas to reduce the deficit, relative to the level it would otherwise have been, by $30 billion for 1988 and $45 billion for 1989. But these steps, welcome though they are, will not be sufficient, by themselves, to reduce the deficit to a tolerable level.
It has been clear for some time that the reduction of the other set of imbalances-the current account imbalances —will depend on domestic demand in the United States growing more slowly than that in Japan and Germany for some years to come. One of the prime objectives of the major industrialised countries, meeting together in the Group of Seven, has been to achieve this in an orderly way. The United States action, and the decision of the German authorities to reduce their key discount rate from 3 per

cent. to 241/2 per cent., the lowest rate they have had since the war, are helpful steps, and paved the way for the G7 communique issued on 23 December.
That communique also re-emphasised the agreement to co-operate to foster exchange rate stability, following a period of turbulence on the foreign exchanges which had seen a further slide in the dollar.
Wild gyrations in exchange rates can create grave uncertainty and damage business confidence throughout the world. Companies in all countries find it more difficult to plan for the future, and have to spend precious time, money and ingenuity on insuring themselves against exchange rate risks, when they should be concentrating on the real job of improving company performance. That is one of the main reasons why the CBI, for example, has stressed the importance to its members of a stable exchange rate.
It is thus natural that countries should seek to act together to prevent excessive exchange rate volatility. Moreover, history has shown that a readiness by countries to commit themselves to some form of exchange rate stability is the only feasible way of securing wider international co-operation on economic policy.

Mr. Stuart Holland: I am most grateful to the Chancellor for giving way. There is a paradox in what he is saying. He is talking about robust economic growth, which he is extrapolating from one quarter's figures for several countries, before the stock market crash. What are his comments on the OECD forecast for a slow-down in European OECD countries to 1·5 per cent. of GDP by 1989? Does he recognise that United States growth will have slowed down from about 3 per cent. a year in 1985 to not much more than 1·5 per cent. in 1989?

While exchange rate stability is an objective in itself, it is the volume effect on demand for United States exports that will be crucial. What action will the Chancellor take, with other Finance Ministers, to get spending going in the global economy, whi: While exchange rate stability is an objective in itself, it is the volume effect on demand for United States exports that will be crucial. What action will the Chancellor take, with other Finance Ministers, to get spending going in the global economy, which is the real basis for the recovery of the United States' trade and payments deficit?

Mr. Lawson: Clearly I should not have given way to the hon. Gentleman.

Mr. Holland: Answer the question.

Mr. Lawson: As I have said on a number of occasions, there is likely to be some slowing down of world economic growth this year but it is a slowing down from a considerably higher level than was earlier recognized—the level in 1987. Far from there being any of the dangers that the hon. Member for Vauxhall (Mr. Holland) mentioned, the policies he advocates would simply lead to a resurgence of inflation.
If countries are indeed prepared to accept wholeheartedly the exchange rate commitments to which I was referring before that rather lengthy and inconsequential intervention, they will find themselves obliged to pursue domestic policies which are consistent with their exchange rate objectives. That applies most obviously to monetary policy, though fiscal policy also has a vital supporting role, particularly over the medium term. It is, however, an academic dream, divorced from reality, to imagine that sovereign states will be persuaded into consistent domestic policies simply by a process of careful international analysis and discussion.
Of course, countries may choose at any time to ignore the implications of the exchange rate arrangements they


have entered into. Sovereign states cannot, in the end, be required to take particular courses of action. But if they are not prepared to play their part in an agreement with the visible, measurable, objective of broad exchange rate stability, within a framework of low inflation—I stress the necessity of that framework — it is hopelessly unrealistic to imagine that a more general agreement on consistency of fiscal and monetary policy would stand any chance at all of working. Those who suggest otherwise are not living in the real world.
Let me be quite clear. I am not suggesting a return to anything like the rigid exchange rate system that applied under Bretton Woods, which contained the seeds of its own destruction. But I believe that there are clear advantages in a more managed approach designed to prevent the wild gyrations of recent years, particularly in the dollar, and in so doing achieving greater international co-operation in economic policy more generally.
The events of recent years underline the point. It is most unlikely that the heady rise in the dollar during 1984 would have taken place if there had been an exchange rate agreement at the time, and the United States authorities had thus been obliged to give greater weight to the external value of the dollar in the conduct of their monetary and fiscal policy. Had that been so, the imbalances that plague us today, and the protectionist threat that accompanies them, could never have developed to the extent that they have.
Since the United States became converted in 1985 to the desirability of co-operation on exchange rates, we have had the Plaza agreement in September 1985, designed to deal directly with the problem of dollar over-valuation, and over the following 15 months we saw an orderly, but substantial, depreciation. The Louvre accord, signed in February of last year, provided a period of broad stability, intended to allow the major economies to adjust to the massive exchange rate changes that had already taken place.
A number of commentators have seized on the decline in the dollar that has occurred since October to suggest that the Louvre accord was fundamentally flawed, and thus unsustainable, from the outset. I have to say that I disagree. As Paul Volcker observed in a speech in Geneva in November:
The argument of some seems to be that the agreement sacrificed appropriate internal economic management to the requirements of a stable exchange rate. That seems to me a misreading of both the nature of the understanding and, more broadly, the need to accord the requirements of exchange rate stability more prominence in economic policy-making.
I was pleased to note, too, that the Select Committee said in its report—and I quote:
give weight to ensuring reasonable stability of exchange rates which was the original intention of the Louvre agreement.
It is of course clear, and this is implicit in both the Plaza and Louvre agreements, that stability of exchange rates cannot be achieved simply by wishing that it were so. Appropriate domestic policies—fiscal and in particular monetary — are required. For a period, the Louvre accord brought the necessary results—stable exchange rates, greatly helped by the fact that interest rates in the United States rose, and those in Japan and Germany edged down.
What brought that period of stability to an end was the perception in the market that the Americans were no longer committed to the Louvre agreement, and were simply concerned to prevent any risk of domestic recession

as they saw it. The markets were also aware that, after commendable progress in fiscal 1987, the United States looked unlikely to reduce its budget deficit for fiscal 1988 by anything like the extent agreed at the Louvre.
During November and December, therefore, the dollar appeared to be given little weight in United States policy, with the inevitable result of turmoil on the foreign exchanges, with the dollar falling and expected by many to fall further. Last week, however, the United States authorities demonstrated a renewed commitment to supporting the dollar, with the Federal Reserve bank intervening, in concert with other central banks, to a very much greater extent, and doing so in a deliberately public way. This ending of a brief but damaging phase of so-called benign neglect is a step in the right direction. but it is idle to suppose that official intervention on its own, even when it is co-ordinated internationally and involves full United States participation, amounts to a coherent policy.
But intervention is an important tactical weapon, and it would be foolish not to use it when appropriate. In our own case, it has helped us to achieve a remarkable degree of stability for sterling, particularly against the deutschmark — something that is widely welcomed by British industry—and in the process to build up our foreign exchange reserves to an adequate level.
The desire at the Louvre to allow time for the exchange rate changes to have their effect on trade imbalances is equally important now. The financial markets were perhaps surprisingly slow to wake up to the imbalances in the world economy, but when they did, they showed signs of impatience at the slowness of the adjustment.
In fact, important changes are taking place. Although the published United States trade deficit has shown very little improvement so far the volume figures have moved very substantially: for example, in the year to the third quarter of 1987, exports had risen by 15 per cent., whereas imports were up by only 6 per cent.
As many of us had warned, there was bound to be a lag before these developments fed through to the current account — the well known J-curve. Repeated dollar depreciations, so far from speeding up the adjustment of the current account, can only add to the length of the J-curve. This is particularly the case if, at the same time, domestic activity is not adequately reined back.
Looking forward to the prospects for 1988, it is clear that there remain very real risks in the outlook for the world economy. While there is no immediate prospect of recession, the substantial dollar depreciation could lead to serious inflationary pressures in the United States and there still remains the threat of creeping protectionism, which could at any time escalate into a trade war.
However, the current strength of the world economy, which I illustrated earlier, does give us a breathing space in which to get the world economy on to a more sustainable footing. Some of the necessary steps have already been taken, but more action needs to follow. We must get the right policies in place, and pursue them with patience and determination, because there are bound to be periods of difficulty which we shall have to ride out. Provided we can do that, although there may be some slowdown in world economic growth, I am confident we can avoid the twin dangers of inflation and recession.
Clearly, we in Britain cannot wholly insulate ourselves from developments overseas, and we should not imagine otherwise. But subject to those inevitable uncertainties, it is clear that the British economy is well placed to continue


the excellent progress of recent years in spite of the problems faced by many other countries and the turbulence in the financial markets.

Dr. Jeremy Bray: The Chancellor has emphasised the importance of exchange rate stability and the dependence of exchange rates upon the fundamentals, but he has said that it is not realistic to expect different Governments to agree about wider economic matters within their domestic economies. Can he reconcile those three statements?

Mr. Lawson: Yes, indeed. This has been the lesson of history. What I said was that the wider co-operation that has occurred has been a result of the acceptance by the major countries of an external discipline. The gold standard was a good example; it operated successfully for a long time. That is the point which I was seeking to make, and am I sorry that the hon. Gentleman failed to understand it.
Britain's strength is clear to the OECD, which forecasts that in 1988 we shall once again be among the fastest growing of the major industrial nations. It is clear to the many thousands of companies from overseas which are coming to invest in Britain. It is clear to those who run industry—take, for example, the American chairman of British Oxygen, Mr. Richard Giordano, who said last year:
In the last half dozen years, Britain has done a pretty good job. If I was a company having to set up in Europe, it is Britain I would choose.
And it is clear, of course, to the British people, as they demonstrated in the general election only eight months ago.
In fact, the strength of the economy is clear to everybody except to the Opposition. Their problem is that they are so wedded to living in the past that they cannot accept that the policies we are following, which are precisely the reverse of those they followed when they were in office, can possibly have led to the success we see around US.
When it became clear that growth in 1987 was moving well ahead of the already strong trend of the past five years, the Opposition put it down to a short-lived preelection boom. I am sorry that the hon. Member for Dagenham (Mr. Gould) is not here. Being of New Zealand origin he may, I hope, have gone back to his native land to learn an excellent lesson from the policies being pursued by the Labour Government in New Zealand. They could certainly teach him a lot. Anyhow, last February he spoke of the
irresponsible and profligate spending boom which the Chancellor hopes will sweep him to a general election victory".—[Official Report, 18 February 1987; Vol. 110, c. 942.]
I am glad that the Opposition accept that we had a sweeping victory. I have to tell the hon. Member for Dagenham and his hon. Friends that growth in the period since the general election has, if anything, been stronger than it was before the election, and further non-oil growth —less rapid than in 1987, but still in excess of anything ever achieved under the Labour Government — seems likely in 1988.
The Opposition put the alleged pre-election boom down to higher consumer spending. Again, they are barking up the wrong tree. Growth in 1987 was stronger

than in 1986 precisely because investment growth picked up and exports increased more rapidly than in the previous year, in the aftermath of the oil price collapse.
The Opposition also claimed that this so-called preelection boom would be instantly reversed. In the last Autumn Statement debate, which I looked at just before coming to the Chamber, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made one of his justly notorious predictions:
An election victory would be followed by a massive increase in taxation",
he alleged. He went on:
There would be more public expenditure cuts." —[Official Report, 17 December 1986; Vol. 107, c. 1253.]
He has now had his answer on public expenditure in the clearest possible terms, with the substantial increases announced in the Autumn Statement. Whether he was right or wrong about taxation, of course, remains to be seen, but he will only have to wait now for another two months, until 15 March, for the massive increase in taxation which he so confidently predicted, if indeed there is one.
Meanwhile, having warned of a dangerous boom, the Opposition have now reverted to their normal cry that higher borrowing and lower interest rates—an unlikely combination, if ever there was one—are needed to stave off impending recession.
It was once said that Wall Street had correctly forecast 13 out of the last five recessions. The Opposition have done even better, because they predicted recession in each and every one of the last six years, and in each and every case they have been wrong. The trouble is that all the old beliefs that they have clung to in spite of the accumulating evidence are being finally and definitively disproved. They believe that economic growth depends on ever higher public spending, paid for by higher borrowing and higher taxes, and on easy money. They should look at what happened last year. Public borrowing, even leaving aside privatisation proceeds, looks like turning out at the lowest level since 1970–71. Interest rates, as the Opposition themselves point out, are, if anything, a little above the international average, yet we have seen the strongest period of sustained growth since the war.
For some time the Opposition justified their attachment to higher borrowing by reference to the experience of the United States. The whole House, and certainly my hon. Friends, will recall the right hon. Member the Leader of the Opposition urging the Government to borrow on a massive scale and saying:
They cannot even see the lesson of the United States economy when it is staring them in the face". — [Official Report, 31 July 1984; Vol. 65, c. 236.]
It is now all too clear who got the wrong lesson. With his unerring instinct for backing a loser, the right hon. Member made the keystone of his party's economic policy what has turned out to be the Americans' undoing—an excessive budget deficit.
Right hon. and hon. Members of the Opposition completely failed to appreciate the real reasons for the rapid creation of new jobs in the United States. They ignored the role played by the low tax burden. They ignored the importance of labour market flexibility and low wage increases, which contribute so much to the fact that unemployment in the United States is lower than in any major country in western Europe. They completely


failed to appreciate the importance of deregulation and of the enterprise economy. As usual they got the wrong end of every stick.
The short point is this. A successful economy cannot be created by the Government pumping in money. It depends on the performances of businesses and the individuals at all levels who work in them. That is what led to the outstanding performance in Britain in 1987. That is what has given us an upswing of unprecedented length, strength and steadiness. That is what enables us to look forward to the future with confidence.
The most telling example of the transformation in British industry is to be found in manufacturing. The Opposition, of course, always paint a gloomy picture of British manufacturing as an industry in terminal decline, in contrast with what they allege to have been a golden age under their stewardship. Nothing could be further from the truth, and I will give the figures for 1979.
The plain fact is that manufacturing output fell over Labour's period in office whereas during our whole period of office since 1979 it has risen. But the contrast goes far beyond that, because the underlying strength of British manufacturing industry has been transformed. Britain's manufacturers have increased their profitability for five years in succession, the best performance for a generation.
Does the right hon. and learned Member for Monklands, East (Mr. Smith) wish to intervene? He will have his chance in a moment, anyway.

Mr. John Smith: I thank the right hon. Gentleman for encouraging me to ask the obvious question. He said that he wanted to be judged by output. Can he tell us by how much manufacturing output has increased since 1979, after eight years of Conservative Government?

Mr. Lawson: The point that I am making is such a simple one that even the right hon. and learned Member ought to understand it. It is that during the whole of the Opposition's period of office manufacturing output fell, and during the whole of our period in office it has risen. That is clear to everybody, even the right hon. and learned Gentleman.
In the past, strong growth of the kind we have seen would undoubtedly have quickly fed through into much higher inflation. In fact, although prices in 1987 rose somewhat faster than in 1986, as the one-off benefit of the oil price fall was lost, inflation remained low throughout the year. At the same time unemployment fell rapidly. Today's figures—which I am sure the right hon. and learned Member for Monklands, East will want to welcome as soon as he gets up to speak—show that during 1987 as a whole the number of people out of work fell by more than half a million — the biggest fall on record, with the rate falling far faster than in any other major country over the same period.
In the Autumn Statement, I forecast that growth in 1988 would be 2½ per cent. for the economy as a whole, with the non-oil economy growing at 3 per cent. I shall, of course, be making another forecast in the Budget and I do not intend to make one today. However, on the question of the non-oil economy, which is critical for new jobs, let me just say this. Growth of 3 per cent. for the non-oil economy in 1988, although slower than last year, would be a thoroughly creditable performance. The Labour Government never once achieved 3 per cent. growth, with

or without oil. Indeed, it was only achieved once in the whole of the 1970s, yet we have achieved that rate of growth in four out of the last five years.
Keeping the economy on track involves keeping a constant watch on all the indicators of how the economy is developing and then taking action as necessary. I have never hesitated to act in the past when I have judged that there was a risk to our inflation objectives. I can assure the House that I shall not hesitate to do so in future. It is precisely by acting promptly that we have been able to avoid the need for drastic and destabilising lurches in policy. Our track record speaks for itself.
We enter 1988 with the British economy in good shape and the public finances sounder than at any time since the war. That is no coincidence. When we came to office in 1979 we gave the highest priority to restoring the public finances to a sound and sustainable condition. That is one of the rocks on which the new strength of the economy has been built. Thanks to that achievement, we have been able to choose to increase public spending, especially in priority areas, while continuing to reduce overall public spending as a share of gross domestic product. Unlike the Opposition when they were in office, we have been able to sustain our policy year in, year out.
The Opposition, of course, are brimful of ideas for spending ever higher amounts of the taxpayer's money, and no doubt we shall hear more of them today. The plain fact is that, had their policies been implemented, the money simply would not have been there in the first place. It was certainly not there in the 1970s, and it would not have been there in the 1980s either.
The Autumn Statement which we are debating today, my first in this Parliament, embodies the consistent strategy that we have been pursuing since 1979. I commend it to the House.

Mr. John Smith: I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
`regrets that the Autumn Statement fails to provide adequate resources for the vital public services and the people who need them, particularly the National Health Service which consequently faces further under-funding next year, and, despite a deteriorating situation in the balance of trade and balance of payments and unsettled international economic relationships, does not propose measures to strengthen manufacturing industry and science and technology, promote vigorous regional development, or significantly reduce unemployment'.
I suppose that it is not unusual for this Chancellor of the Exchequer to dodge the main issue in the debate, but we should remind him that the debate is about the Autumn Statement. Although it is interesting to hear his views on the world economy, and although it is important that we should discuss that matter, among other things, one would have expected a Chancellor of the Exchequer who had proposed the Autumn Statement — this is the first opportunity which the House has had formally to debate it—to defend and argue for the propositions contained in this crucial statement of the pattern of public expenditure. However, the Chancellor is fulfilling his promise that he would not say a word about it. He said that he would leave it to his right hon. Friend the Chief Secretary, who, of course, will be the last speaker in the debate, so there will be no opportunity for any hon. Member to hear the Government's views about the


Autumn Statement until the wind-up speech. That does not seem to be the action of a Chancellor who is confident of his ability to defend the propositions that he put forward in his Autumn Statement.
Labour Members conceive their role to be slightly different. We shall probe the underlying issues in the Autumn Statement and invite the Government to defend some of the conclusions that emerged from it. However, before I do that, I have to comment on the fact that we have had to endure once again the commonplace of speeches by the Chancellor of the Exchequer that the British economy, under his beneficent stewardship, is in a condition of near perfection. If I exaggerate, it can be only slightly, because the Chancellor never misses an opportunity to say how difficult things are in the rest of the world but how well-managed they are here in the United Kingdom.
I have a purpose in making that statement. To put it mildly, the Chancellor's claim is a matter of dispute. A glance at the balance of trade figures, particularly the prognosis for the balance of payments, which, typically, the Chancellor once again ignored, would soon jolt back to reality anyone who might temporarily have succumbed to the public relations hype which the Government substitute for serious policy discussion and presentation.
To elucidate some of the important issues on the public expenditure front, let me, for the purposes of argument, if for nothing else, assume that the Government are correct in their claims for the economy. Let us assume that the economy is stong and that the nation is prosperous. Let us assume also that, as every economic commentator predicts, the Chancellor will, by 15 March—the ides of March—have £3 billion to £4 billion at his disposal. Some commentators put the amount higher than others, but all agree that that figure is roughly correct. It would be fair for the purposes of argument to proceed on that assumption.
Let us consider public expenditure in that context, particularly spending on the National Health Service. I hope that the House does not need to be reminded of the crisis in our Health Service. The Government's first response to the crisis was to deny that it existed. Day after day, particularly during and after questions to the Prime Minister, from about the time of the Autumn Statement until quite recently, there was an endless barrage of statistics from the Prime Minister. Most people waiting for treatment and their relatives who could not find treatment in our hospitals, particularly in the acute services, found those statistics pretty wildly irrelevant to their problems and to their circumstances. They were irrelevant to the fact that there were empty wards because there were no trained nurses available to staff them. They were irrelevant to children who had to wait for serious heart operations.
The Government's first attempt was to deny that the problem existed. That attempt was increasingly undermined as a position which they could defend, as medical and nursing professions, appalled at the crisis that they knew existed in the service and strongly supported by a public who rely uniquely on the National Health Service for the prevention and cure of illness and disease, the alleviation of avoidable pain and the moderation of disability, made it crystal clear that the Government's

presentation of the condition of the National Health Service was in stark contrast to the reality encountered in hospital wards.
Let us take just one manifestation of that concern—the protest by the heads of the three royal medical colleges. They spoke out against what they described as the breakdown of acute hospital services and the almost total collapse of morale in hospitals. Yesterday, they at last met the Secretary of State for Social Services. At long last, after months of the campaign, the Government have admitted that there will be a need to increase the total resources available to the National Health Service. I hope that that means that we shall have an amendment to the proposals in the Autumn Statement. Nothing was said about it by the Chancellor of the Exchequer. We would find the statement made by the Secretary of State for Social Services to the heads of the royal medical colleges a little more convincing if he came to the House of Commons today and explained the financial changes that the Government are prepared to make, following the assurances that they apparently gave to those senior medical figures yesterday. We shall wait with interest to hear the Chief Secretary spell out the increase in resources that the Government propose to make.
Let us accept that we have passed by the argument that there is no need for more resources. Both sides of the House agree that we urgently need more resources for the National Health Service.

Mr. Patrick Thompson: rose—

Mr. Smith: I shall give way to the hon. Gentleman in a moment.
This is where we come to the importance of the assumptions about the economy. If the economy is strong, if the nation is prosperous, and if the Government have £3 billion at their disposal, what on earth is to stop them spending it on the National Health Service? We know that it is not a matter of resources not being available. A political choice is being made and the Government are calculating whether to spend the money on tax cuts or on the National Health Service.

Mr. Patrick Thompson: Given the desire for an increase in resources, will the right hon. and learned Gentleman say exactly how many extra resources he would raise by increasing taxation?

Mr. Smith: On a visit to St. Thomas's hospital only a few days ago, the Leader of the Opposition gave a good response to the question asked by the hon. Gentleman. The first step that we recommend should be taken is that the underfunding of the hospital services commented on in the unanimous report of the Select Committee on Social Services—underfunding which existed for four years up to 1986 and which would cost about £1·3 billion, equivalent to about 1 p on income tax, according to the ready reckoner attached to the Autumn Statement —should be made good. That is a clear and specific commitment well within the range of what is available to the Government.
As the hon. Gentleman asked me a straight question and I gave him a straight answer, will he put the same question to the Government? Has he any confidence that he will get as specific and direct an answer as I supplied? I suppose that the hon. Gentleman must have been among the Tory Members canvassed in an opinion poll a few


months ago when the question was put to them: would they prefer the money to be spent on the National Health Service or given in tax cuts? A large majority of Conservative Members preferred tax cuts to spending on the National Health Service. I dare say that it might be more difficult to find hon. Members willing to admit that they accepted and defended that conclusion, after the events of the last few weeks, in view of the public concern about the National Health Service.

Mr. Phillip Oppenheim: rose—

Mr. Smith: I shall give way to the hon. Gentleman as, almost certainly, he will want tax cuts rather than more spending on the National Health Service.

Mr. Oppenheim: Will the right hon. and learned Gentleman tell the House how much money would be needed to be put into the Health Service to ensure that anyone who could be treated was treated and that no one was kept waiting unnecessarily long for an operation? How much money would be needed to ensure that everyone could be treated, and how would he raise it?

Mr. Smith: It is a matter of great fascination to me that serious questions about funding the National Health Service are addressed to the Opposition and not to the Government. Even on the Conservative side of the House there is no belief in the sincerity of the Government's commitment to the National Health Service. Of course, enormous amounts of money could be spent on the National Health Service and Government after Government have said that they would always spend all the money that they would always want to spend on it, but we need to spend significantly more than the present Government are spending. A few months ago they told us that it did not need to be spent. They have been moved from that position by the outcry from the medical profession and the public. They have moved, but they have not yet moved financially. We have only about another £100 million on top of the several hundred million pounds of planned extra expenditure in the Autumn Statement and we have some way to go to obtain a better provision for the Health Service. But we now know that we shall be given the answer on 15 March when the Chancellor, who has £3 billion at his disposal, decides to spend the money either on the Health Service or on tax cuts. We shall then know clearly the Government's political priorities.
Part of the trouble about the Government's approach to public expenditure as a whole, and the NHS n particular, is that Ministers and Conservative Members have a less direct and personal contact with the public services than have the public whom they serve. We know that that is so in the case of the Health Service. When the Secretary of State for Social Services has to go into hospital, he goes into a private hospital. Many Conservative Members make use of the private education sector. But let them never forget that the vast majority of British people depend on public services for the standard of living and the quality of life that they enjoy.
It is disturbing that we are seeing the emergence of more rumblings from the Right wing of the Conservative party about changes in the NHS. I noticed in the press today that the hon. Member for Wokingham (Mr. Redwood), who is regarded as some sort of significant intellectual figure on the Conservative Back Benches and in whom the Prime Minister until quite recently reposed the special trust of

employing him in her special advisory unit, has issued another pamphlet about reforming, as he calls it, the NHS —he is quite prolific in giving his views—in which he calls the Health Service a monster. Indeed, he goes further and calls it an untamable monster. He recommends various new devices for privatising the Health Service.
That is so far away from the ordinary person's perception of the value of the Health Service that I would not bother with it were it not for the fact that such Right-wing extravaganzas, particularly in the area of privatisation, become official Government policy a few years later. We have learnt at our peril to pay attention to them when they first appear. But on that, as on all other matters to do with public services, the underlying philosophy of the Government is that public expenditure is somehow intrinsically not worthwhile but private expenditure is. Anyone with any common sense knows perfectly well that, whether expenditure is in the public or private sector, it should be evaluated according to the economic or social good which it can achieve.
I am not foolish enough to argue that all public expenditure is good in itself. I deplore—I do not know whether I will take Conservative Members with me—the amount of money that we spend on social security as a result of the unemployment that has been caused by the Conservative party. That is a heavy burden on the shoulders of the British taxpayer. I am not sure— here I am sure that I take my hon. Friends with me in their entirety — that expenditure on Trident is the best example of public expenditure. Nor, I hope, would all Conservative Members argue that all private expenditure is necessarily good, although some have more chance than others to do that. A sensible person would take the view that we should look at the proposed public expenditure to see whether it achieves good economic and social purposes. Under this Government, some credit is always to be taken if either the total of public expenditure or the proportion of public expenditure as part of the national account is falling.
We do not take that view, because to do so implies that there is something undesirable about the public expenditure involved. In the case of the NHS, we have already had to point that out to the Government. It has taken some time to establish—I hope that we have done so—some change of priorities by the Government. But the idea is spread that the fact that the NHS is publicly organised somehow means that it will be less efficiently organised than it would be if it were organised on a private basis. I see Conservative Members nodding, which means that they would prefer the NHS to become a private system on the view that it would somehow be better administered.
I simply do not understand how Conservative Members can hold that view when they look at the private medical system in the United States. Not only are 36 million Americans not covered by the health care in that country, but the cost of administration and bureaucracy arc breaking the back of the system. We know that our NHS has to allocate about 2·6 per cent. of its budget to administration. I am sure that everybody would want to reduce that figure as much as possible, because every pound that is released from administration can be spent on care. There should be no argument or dispute about that. We want an efficient and well-directed Health Service. But the proportion spent on insurance, on collection, on arbitration of disputes and on bureaucratic


organisation of the private health service in the United States is 5·3 per cent.—twice the cost of the NHS. So we argue that the NHS is not only social justice, but efficiency in action for the British people. That is why it is deeply rooted in their affections and interests. That is why the Government will have to retreat in the face of the outcry against the way in which they have handled it.
A similar approach runs through the whole of the Government's view on public expenditure. We see it not just in social expenditure but in public expenditure that is used to support the economy. I am thinking in particular of spending on science and technology, research and development, regional economic development, education and training. All need public expenditure, and that public expenditure is valuable capital investment in the British people and the future of our economy.
Let us look at the statement made earlier this week by the Secretary of State for Trade and Industry on the scrapping of regional development grant. In the usual way in which the Government go about their business we were told that that really does not mean much because in place of the automatic grant on which industry can rely at the moment in deciding whether to go to the north, south, west or east of the country, there is to be regional selective assistance. It is said that Ministers have made provision to spend as much by way of regional selective assistance as by way of regional development grant. We are invited to draw the conclusion that there has been no change in the objective of the policy, just a change in the means of achieving it.
There was what I can describe only as marked scepticism on the Opposition Benches at that presentation of the Government's policy. I doubt whether regional selective assistance will come remotely near the amount of money spent on regional development grants. The Government's fundamental purpose is to reduce the impact of regional economic policy, and certainly to reduce its cost. I see no signs of indignation on the faces of Ministers at that charge.
I think that I know how that will be achieved. It is typical of the Government's modus operandi to say that something has become selective and to manage matters so that the money will be reduced. Once something becomes selective, Ministers can refuse more applications than they grant. Then they will claim that expenditure has gone down because there has been less demand leading it forward.
We were given an interesting insight into the Government's approach by the way in which the Department of Trade and Industry administered the innovation and hi-tech investment grant. It was revealed in a memorandum circulated by Mr. Anthony Kesten, a senior official in the Department, and it came into the hands of one of my hon. Friends. It instructs officials on how to deal with applications for grants and says:
As you may be aware, Ministers have decided that, as part of their continuing review of DTI support, they want a more critical view to be taken by officials of possible support for single company R and D.
It goes on to describe various schemes covered by the memorandum and then comes the interesting part:
Ministers have said that, while companies should not be firmly discouraged from making applications, no attempt should be made to seek them out.

It goes on to list various ways in which companies can fail to be encouraged:
I should emphasise that Ministers do not see the new requirements as marking any change in policy and it is essential that, in their day to day contacts with companies, case officers do not suggest otherwise.
The published guidelines remain and officials must not say that they have been diverted from them, but there must be fewer applications and it is the duty of officials to make sure that that happens. The document continues by saying that when officials visit companies they should not reveal that there has been any change in policy. In case there is any doubt about whether this is meant to bite and applications are meant to fall as a result, a phrase in the last part of the document says:
Offers that have been made prior to today are not affected by this instruction.
So this is an instruction from Ministers to officials in the Department to make a change of policy but not to reveal it to those who are affected by it, and to make sure that fewer applications are granted. I can think of no more appropriate demonstration of the disreputable and deceitful techniques adopted by the Government than that revealed by this memorandum produced by the Ministry. It would be useful if some Minister told us about it at some stage.

The Chief Secretary to the Treasury (Mr. John Major): If the right hon. and learned Gentleman believes the memorandum was such a secret, perhaps he could explain why this was announced in the DTI White Paper.

Mr. Smith: The scheme has now been completely abolished in the DTI White Paper, so we shall not need to bother with it. As the right hon. Gentleman knows, the existence of the memorandum was revealed before the White Paper was published. The shadow Chief Secretary did us a public service by giving the memorandum to the newspapers before the Government published their White Paper, so the Chief Secretary's excuse will not do.
Does the Chief Secretary think that it is right for Ministers to give instructions to officials to pretend that a policy has not changed when it has? The fact that the Chief Secretary, perhaps prudently, remains in his place shows that he would find defending what I have described impossible in a decent and sensible Government. But it is, I am afraid, typical of what goes on.
The Government approach public expenditure from a fundamentally erroneous standpoint, both in terms of value and economic analysis. The truth is that well-directed and targeted public expenditure has a crucial role to play in providing good social services and achieving a successful economic policy. If we do not invest in science and technology, research and development and training, we cannot provide a base for long-term sustained growth, particularly for industries at the leading edge of technology, which are especially at risk now. The Government must know, because almost everyone in British industry knows, that the technological base of British industry is dangerously fragile. In case the Chancellor believes that that is merely an invention of the Opposition—he seems to think that every criticism of the Government comes from some deluded imagination on the Opposition Benches — let me quote to him the Financial Times leader for 13 January. Today is 14 January, so I am pretty up to date and cannot be accused of lack of topicality:


British industry is still beset by many problems; productivity is between a half and a third lower than that of its competitors; private sector spending on R and D and training is low; few companies can claim to be world leaders in their sectors; the regional spread of industry is exceptionally uneven, with head offices, jobs and purchasing power concentrated in the south-east".
I do not wish to criticise British industry merely for the sake of it, but many people would regard that as an accurate statement of some of the problems facing British industry. What it says about technology and, even more so, about unbalanced regional development is certainly true.
Of course, the Prime Minister and other members of the Government constantly pretend that there is no north-south division in the country, but everyone else knows that there is. We know that we have unbalanced economic development. There is a danger that, to prevent overheating in the south, the brakes will be clamped on the economy and the north will find itself in even more difficulty because it has never even got going.
The misallocation of resources —especially of social resources— that results from this unbalanced economic development is large. It is having a dastardly effect on the regions. On any analysis of the British economic situation we discover that, as the Financial Times leader said, the reality is startlingly different from the complacent picture sketched by the Chancellor. If we read his own Autumn Statement carefully we discover that it predicts that growth will fall, inflation increase and the balance of payments deficit deteriorate.
The Chancellor does us no service by minimising the dangers that face the economy. Many of them arise from the short-term policies of recent years — stimulating a consumer boom for electoral considerations, for instance — which have generated an unsustainable economic growth and aggravated our balance of trade and balance of payments problems.
It is also true, as I think the Chancellor is willing to recognise, that some of our dangers stem from the dangerous disequilibrium in the world economy. He referred at some length to the international position. We recollect that after the events of Black Monday he promised us a meeting of G7 within a short time. He said that as soon as there was an accord with the United States there would be a meeting of the G7 Ministers. That was repeated throughout December but there was no meeting; the so-called telephone accord was scrambled together on 23 December—just before Christmas. It did not appear to have much useful effect in the markets. It does not look as if there will be a meeting of the G7 Ministers in January, either. It looks as if there will be no meeting at all.
It is difficult to believe, given the serious problems facing the world economy, that it is not imperative that the leading industrial nations get together to hammer out common policies to tackle these common problems.
We have three acute inter-linking problems—the enormous imbalance in world trade, the management of currency values and the international debt problem. In recent days there has been an intervention by the central banks — the Chancellor referred to it—to thwart the speculators who prey on movements in currencies. However, I am bound to observe that, while I am glad that that appears to have had some success, it might have been wiser, before the end of the year, to make sure that the United States was prepared to defend its currency before

our reserves were swollen by dollars at what Treasury officials conceded to the Select Committee was a probable loss of 10 per cent. due to the dollar's subsequent fall.
What action have the Governments of the G7 countries taken to deal with the trade imbalances? They may be operating through their central banks to exert some influence on the exchange rates. Incidentally, the Chancellor has travelled a long way from the days when he said that exchange rates, like interest rates, were matters for the market. That was all we heard from 1979 to 1981. He talks about consistency of policy—what a change to move from the markets deciding these matters to managed floating. What on earth is managed floating if not a roundabout system of intervention? It is a way in which a person who did not previously believe in intervention comes to say that he is now in favour of it. The Chancellor cannot say that he wants managed currencies, because he wants to retain an element of floating, so now we have a hybrid called managed floating — the Chancellor's contribution to the international economic dialogue. It is a little imprecise, as one would expect from the author of the phrase. It is not clear how it will work or whether anyone agrees with it, but it is the Chancellor's contribution. I suppose that we should welcome any signs of his repentance and of his having at least moved away from the rather arid free-market, non-interventionist doctrines that he preached to the House, in the name of consistency, from 1979 to the early 1980s.
We must concert the economic policies of the major countries that are in difficulties. It is all very well for the Chancellor to wring his hands and say that it is an academic dream to think that countries will be able to concert their domestic economic policies—that was what he said in his speech. It is also an academic dream to think that free markets can solve all the relationships between countries. As far as I can see, that is a much more academic, and certainly a much more dreamlike, way of approaching the situation than attempting, by persuasion, diplomacy and patient efforts, to encourage other countries to bring their policies more in line with each other or, at least, to run them in such a way that they do not conflict with the common interest of economic stability.
If the United States unwinds its trade deficit too quickly —the Chancellor referred only to the budget deficit; he did not deal with the trade deficit—the danger is that there will be trouble, not only for the system, but more especially for those who trade with the United States. If we are to avoid the recessionary perils and the downturn in world economic activity that might lie in store, we need an expansion in the economies of Western Europe and Japan. It is true that there has been some expansion in Japan. However, it appears that, if anything, West Germany is moving in a more restrictive direction, if recent statements by the Finance Minister and the Chancellor of the Federal Republic are to be fulfilled.
Our Chancellor may say that others are not behaving as they should. He was happy to berate the United States in his Mansion house speech and did so a little today. Criticism has been directed heavily against that quarter, but West Germany is now appearing as a co-defendant in the Chancellor of the Exchequer's dock.
I cannot help but observe that the United States large trade deficit was the basis of a great deal of the British exports, without which our trade balance would look even worse than it does today. Therefore, it would be more


fitting if the Chancellor gave at least a nod in that direction when he feels that he must criticise the United States so vigorously.
Are we not told by the Government, who find it difficult to persuade other countries to concert their policies, that Britain has a new importance in the world and that unlike previous years, when, it is said, we were not regarded as an important country, we now walk the world's stage with a new-found self-confidence which is based on the Government's vigorous economic policies? If that is so, why does nobody else in the world appear to listen to the Chancellor?
The Chancellor could usefully spend some time with his colleagues, the Finance Ministers of the other G7 countries, in preparing a joint approach to tackle those problems. They should work hard at what is perhaps the difficult work of concerting their policies and they should start as soon as possible. They should not, of course, put the international debt problem to one side. Although there has been some movement regarding Mexico, little international attention has been paid to the problem.
I am prepared to be generous to the Chancellor and accept that his proposals for the sub-Saharan situation should be welcomed. Indeed, they are certainly supported by Opposition Members. However, he has not persuaded anyone else about them and has certainly not yet persuaded the United States. The international debt problem must be tackled with much more vigour by the leading industrial countries and must be given a much higher place of importance on the international agenda.

Mr. Tim Yeo: The right hon. and learned Gentleman has tried to have some cheap fun at the Government's expense over the description of managed floating. Will he be specific on one point and add to his welcome for managed floating a welcome for the present exchange rates that that policy has achieved? If not, will he tell us precisely at what exchange rate his party thinks that the Government should now aim?

Mr. Smith: I do not think that it was cheap to comment on the Chancellor of the Exchequer's and the Government's development of thinking since 1979. That seems essential background for understanding some of the things that he said today. I would take the hon. Gentleman's criticism a little more seriously if he could point out any inaccuracies in what I have said. However, I have described accurately the way in which we have moved from non-intervention to intervention in an elliptical manner.
The exchange rate at any particular time is a matter of judgment. One must especially take into account the effect on industry in this country. I fear that the Chancellor is excessively nervous about interest rates because he is not confident about inflation in this country. That is why he turned down the CBI's request to reduce interest rates. I am flattered that the hon. Member for Suffolk, South (Mr. Yeo) should be so anxious to find out the detail of the policy from the Opposition. That is a welcome development. Conservative Members are finding it hard to obtain answers from Ministers, so I encourage them to ask for answers from the Opposition.
I should like to turn —[Interruption.] Well, the experts on turning are on the Conservative, not the Opposition, Benches. The hon. Member for Tatton (Mr.

Hamilton) is as yet unconverted. He is still a primitive monetarist, which is why he is not on the Treasury Bench. He would have to change his position to move to the Treasury Bench.
To achieve some change in international policy the Government would need to see our position more clearly. The trouble is that they are suffocated by a cloak of self-satisfied complacency and self-congratulation, which prevents the development of an alternative policy to the present chaotic state of affairs.
That sense of complacency obscures an appreciation of the real problems and dangers that lie ahead in the British economy. The Chancellor knows perfectly well that inflation is likely to increase. Indeed, the Autumn Statement predicts that it will increase, which is why he is so nervous about interest rates. He knows that productivity growth is likely to slacken and that it is unlikely to be sustained by the sort of supply-side policies of support for science and technology, research and development, investment in manufacturing industry and so on, for which the Labour party argues but which will not be followed by the Conservative party.
The Chancellor knows that an economic boom that is founded on a massive extension of consumer credit is built on shaky foundations. He knows that all predictions about world growth head downwards. Indeed, they were heading downwards even before Black Monday and are likely to be revised downwards even further as expectations diminish. In that situation— [Interruption.] I am facing the facts that are set out for us by the Organisation for Economic Co-operation and Development, the EEC and the World Bank and, indeed, by all who comment on the international economic situation. I advise Conservative Members that it is extremely instructive to read OECD publications to discover what it says about the British economy and to compare that with what the British Government say and, even more, with what the British press says about the British economy. One would hardly think that one was looking at the same set of circumstances.
A wise Chancellor would face the problem squarely and adapt his policies to meet it. Let me give the Chancellor some advice—[ Interruption.] I am not arguing for the Government being consistent; I am trying to change their policies. My whole purpose in life is to modify the Government's policies. I welcome the changes of heart, but wish that they were more sincere and better developed. Indeed, I am hoping for greater things. I shall be living almost entirely on hope in that respect during the next year or two.
We know that there are difficulties and it is foolish to avoid considering them. I should like to give the Chancellor one or two pieces of advice, especially about inflation. He should now announce the abandonment of the foolish privatisation of the electricity and water supply industries. I have an unconfident hope that he might have learnt something from the privatisation of the Government's share of British Petroleum. It does not seem a triumph to have managed the transfer of the predominant share in Britain's greatest company from British national ownership to Kuwaiti national ownership. Had that been advertised as the likely outcome of the operation, there might have been fewer brass bands on display and fewer commandos scaling City office fronts on


the day of the issue. Indeed, it might have been more appropriate to have had a courtesy detachment of the Kuwaiti national guard at BP's front door.
However, despite the warnings of that experience, the Government appear to wish to press on with privatisation. If the Chancellor is serious about controlling inflation, I say to him, "Please avoid imposing that extra 15 per cent. on the cost of electricity in two years to fatten up the books for privatisation; relieve British industry and British consumers of an extra £500 million which does not need to be put on their backs." All he needs to do that is to swallow his pride and to change his policy.
As the Chancellor considers his Budget in the next week or two, I hope he will heed the advice that has apparently been given to him by his own advisers, which is that to proceed with tax cuts would be highly irresponsible in Britain's present circumstances.
I will quote from the Daily Telegraph—it is hardly irresponsible if it is in that newspaper. I believe that the Chancellor once contributed to the City page of that newspaper or one of its sister journals. On 24 December 1987 it was reported:
A row has broken out between the Chancellor, Mr. Lawson, and his senior Treasury advisers over the wisdom of cutting taxes in the next Budget against the rapid deterioration in Britain's overseas payments position … Sir Terry Burns, chief economic adviser at the Treasury, is understood to be leading the revolt against a tax-cutting Budget.
We all wish him luck.
Apart from being a wrong decision on priorities in relation to public expenditure, tax cuts would feed straight through into increased consumer expenditure, particularly in the more prosperous areas, and increase overheating of parts of the economy, exaggerating regional imbalances and, above all, adding a further twist to the increasing balance of payments deficit. If the resources were used instead in prudent and well-directed increases in public expenditure, we could achieve an improvement in services, real help for our struggling regions and better foundations for long-lasting industrial success and avoid an aggravation of our most serious economic problem, which is the balance of payments.
The Chancellor constantly ignores the balance of trade and the balance of payments difficulties, but they will be the most serious constraints on the management of the British economy in the difficult years that lie ahead. I believe that it would profit the Chancellor and the Government much more to take these challenges, problems and difficulties more seriously. I ask the Chancellor to tell the House and the nation how the Government propose that we should overcome them. But to do that would mean abandoning their outlook and some of their prejudices. They would have to change some of their objectives. I hope that that will come about, although I am not confident about it. The Autumn Statement gives us no evidence that it will.
We know from our campaign on the Health Service that, however reluctantly, we have moved the Government. I can assure them that on this cause and some others we will fight and fight again to save the services that we love.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Harold Walker): Order. May I repeat Mr. Speaker's plea for brief speeches.

Mr. John Biffen: The debate on the Autumn Statement is traditionally a wide-ranging economic debate, as we were reminded by my right hon. Friend the Chancellor when he used it as an occasion to consider the world economy. We know that my right hon. Friend the Chief Secretary to the Treasury will be winding up on the contentious issues of public spending, and I should like to direct these remarks mainly to him.
Before I do so, may I say this about the economy more generally. We are holding the debate against a background of a quite remarkably successful record of economic management, which has persisted through several characteristic acts of Government. The Chancellor has been twitted for having adjusted his policies in recent times. All I can say is that wise and prudent control of economic affairs requires that degree of flexibility. Above all, it means a commitment to an underlying theme, which we have inherited and executed since 1979 to bring about greater monetary stability and expansion of ownership, and broadly speaking to create for this country a social market economy that could perform for us what has been performed for our continental neighbours in other circumstances. Much of what we have achieved is a testimony to that degree of resolution.
I should like to make two points to the House. I hope that I shall not detain hon. Members beyond the time indicated by you, Mr. Deputy Speaker. The first of them relates to the search for more effective qualitative and quantitative control of public spending, and the second relates to the social and political priorities revealed by the spending plans of the Autumn Statement. A search for more refined control of public spending has all the elements of the quest for the holy grail. It has preoccupied and detained politicians for generation after generation
Little short of 30 years ago we had what was, I suppose, a seminal contribution from the Plowden report on public expenditure. I suspect that that has been largely forgotten in subsequent comments, reports and inquests, and indeed in the setting up of institutions; a more recent one, perhaps the most colourful of them, is the "Star Chamber". It:is appropriate here that I should pay tribute to Lord Whitelaw, for no man could have presided over such an institution with such genial effectiveness.
But at the end of the day, there is no doubt whatever that the execution of public spending, the determining of its totality, and the identification of priorities are matters that require political will, skill and authority; for it is that, and the interplay of those factors, which is finally effective.
Although I was much rewarded by reading the report of the Treasury and Civil Service Select Committee, when it said:
Our predecessors in 1984 said that they had been increasingly concerned 'that the mechanism for determining public expenditure priorities, which produces the results in the Autumn Statement, is not working as well as it should'",
I have to tell it that that has all the virginal innocence of the Social Democratic and Liberal policy document. We shall always live without that delicate reality of having found a truly objective way in which public expenditure is interpreted. No, it is a political process.
One of the values of our debate this afternoon is that it is a process in which the House of Commons can join. We have the Autumn Statement figures; but we are not here just to underwrite them and say that they are a set of judgments that have been carried out by the Executive


which command our deferential respect. Politics is not like that. It is a continuing process. Only a few weeks ago, £100 million came forward for the Health Service. That expenditure was determined in the context of a proper and continuing debate, in which this Chamber plays a part.
With that reflection, I would like to make a few further remarks about our health spending. Already, this debate is being given a more reflective nature, and that is to be welcomed. My hon. Friend the Member for Wokingham (Mr. Redwood), who has been referred to already this afternoon, has produced a pamphlet pointing out some of the changes that would be appropriate in our approach to providing health services for the nation. It is not simply a question of adding money to the existing structures. That is the short term and immediate challenge, but there is a wider discipline which, unless we recognise and acknowledge it, invalidates calls merely for more money in present circumstances.
I should like to say to my right hon. and hon. Friends, and indeed to the House generally, that it is 40 years since Aneurin Bevan obtained his political immortality with his National Health Service legislation. Any discussion on this topic will always be inspired by the principles that preoccupied his life. But, 40 years on, this is an occasion not just for a memorial service, but for real consideration of factors that begin to affect the whole funding of National Health Service provision in this country.
I should like to put before the House five immediate considerations that I should like to detain some body—perhaps not as ambitious as a Royal Commission, but some study group within Government that would be the precursor for producing a discussion document upon which policy changes could proceed.
First, we have to ask ourselves whether the great increase in personal disposable income has affected the original argument about the extent to which one could look to an element of state managed insurance, as opposed to direct Treasury funding. Secondly, we have to assess and anticipate the demands made upon the service by the changing age structure of our society. Thirdly, the resource implications of changing medical technology have to be further assessed. That factor is of accelerating importance. Then we have to consider the relevance of the present random application of charges. The power to make charges was a very early strain upon the political circumstances of the service. Indeed, it helped in the resignation of Aneurin Bevan. What we have learnt since then is that they have become very much an integral part, albeit modest, of the application of the National Health Service.

Mr. Eric Heifer: Will the right hon. Gentleman give way?

Mr. Biffen: No, I am trying to proceed within the times imposed. I am sorry, because I enjoy debate.
Then there is the undoubted growth of private medical insurance. It is something that we can trace and it is inspired very substantially by group membership of employees, whether trade union members or not; it is very much an employee-dominated expansion.
So let us consider those five principles and make a calm and reflective judgment about what is possibly a more appropriate system of funding for the future than the one we now have. Thereafter, we are likely to be able to say

what institutional changes, if any, are needed. I do not believe that we approach this problem correctly by identifying, all too often, an institutional change—part of the guilt transfer mechanism, blaming area health authorities and so on. It is the other way round: until we get funding more appropriately settled, we cannot hope to get our institutional arrangements correct.
If I apologise to the hon. Member for Liverpool, Walton (Mr. Heffer), I will at least throw this crumb of conciliation to Opposition Members. I am always looking for sustenance from my own mild prejudices. I have been able to find it in "A Fabian Submission" only this week, prepared by David Lipsey and approved by the executive committee of the Fabian Society:
In welfare provision, we need to accommodate a substantial role for the voluntary sector, as well as state and local provision".
I am prepared to accept that as the broad principle on which to try to operate, so that we can see the prospect of National Health reform, if not in this Parliament, certainly soon thereafter.
There is no way in which we can escape the fact that the untrammelled operation of the National Health Service gives rise to intolerable expenditure. Already we are accustomed to think that defence spending cannot be left to the admirals or the generals. In these areas of high technology, the potential for limitless expenditure is quite daunting. The House has recognised that, of course, in the National Health Service. In the last Parliament we spent a good deal of time and emotional energy trying to devise a system—

Mr. Heffer: Will the right hon. Gentleman give way.

Mr. Biffen: No, I am sorry, I will not give way.
— trying to devise a system of setting a control over pharmaceutical prescriptions so that there was a fair balance between the pharmaceutical companies and the consuming public, as reflected in the prescribing habits of the medical profession. Although clinical freedom is a vital concept in the operation of the health services, it has to be set alongside cost considerations no less than in other parts of our expenditure.
I have sought to show that I do not take a very simple approach to the question of medical and health expenditures, that of merely looking at our present expenditures and saying that they are inadequate. We must operate against a prospect of reform for the future. But for the immediate future, there is no way that the public will be convinced that bed closures, ward closures or hospital closures are consistent with an adequate Health Service, even if the number of operations and the amount of expenditure are at record levels. In the short term, there is no alternative to a further enhancement of expenditure upon the Health Service.
We read that my right hon. Friend the Secretary of State for Health and Social Services has seen the heads of three royal colleges and that they are reasonably assured by their discussions. They say that he told them that he would go back and discuss health spending with his colleagues. He will not be discussing with the Minister of Agriculture; he will be discussing his dilemma and his challenge with my right hon. Friend the Chancellor of the Exchequer. It is absolutely essential, for the short-term relief of the situation that now exists in the Health Service, and if we are to have any political initiative to conduct the


wider reforms which are essential, to have a clear transfer of further moneys over and above what is contained in the Autumn Statement.
It is not the task of hon. Members to engage in detailed judgments, and I do not intend to do so at all, but I say to my right hon. Friend that whatever sum is chosen is hound to be related to the total resources that he has available for tax changes and tax reductions. I hope that at least the equivalent of between 1p and 2p of tax change on the direct rate will be available for the Health Service; that is the kind of change necessary to re-secure an initiative in this situation.
There is no question whatever that a reformed and vital Health Service and social services are not an overhead, not an incubus upon the productive economy, but a natural partnership for an economy based upon the social market principles which have sustained this party and this economy so well.

Mr. Robert Sheldon: The House will have heard with great interest the doctrine put forward by the right hon. Member for Shropshire, North (Mr. Biffen) on the position of the Health Service. Although we would certainly disagree on a number of details, there can be no question of the importance attached to it in this debate by my right hon. and learned Friend the Member for Monk lands, East (Mr. Smith) as well as by the right hon. Member for Shropshire, North. They have illustrated its importance both for the future of the Government and for the way in which the Government regard their public expenditure.
We must hope for changes from the Chancellor of the Exchequer because one thing is clear—he is a great learner. He has learnt a great deal in the past eight years during which he has been involved in the management of this country's economy, as Financial Secretary to the Treasury, later in the Department of Energy and more recently as Chancellor, and the House should recognise it and pay some sort of tribute to him for it as well. We must remember that when he started his work on behalf of the Government in financial and economic matters he believed that the markets were able to decide these matters with a degree of perfection which he has now come to understand is not available to it.
As we all know—although there is no point in going into these matters in great detail at this remove in time — he believed in the sanctity of M3 and the monetarist position, and he believed too that these great lessons that had been taught by what he considered to be the mismanagement of the 1970s would be put right in the 1980s. Now he understands that markets, although they may finally decide a number of issues, are, as he put it himself, frequently in a position to overshoot, and that those who look for fundamental causes in the making of their decisions in markets are not likely to do very well in their market operations. The proper success of market operations lies all too frequently in determining the behaviour of other market operators rather than determining the fundamental causes themselves. That is the weakness of markets, and the Chancellor now understands the weakness of markets and the way in which they can fluctuate around any particular norm.
He took those kinds of lessons to the Plaza agreement and used them in the context of the Louvre accord, and they were valuable in helping him understand the way in

which Finance Ministers can co-operate to a limited extent in bringing about a level of the pound, of the dollar, of the deutschmark, of the yen that is in line with long-term prospects.
The realisation of the importance of these matters and the learning process, however, are not at an end. The one thing that the Chancellor of the Exchequer needs to learn is the importance of manufacturing industry. As our oil exports — the oil industry is one of the factors that distort our trading economy—become less and less important and we are able to obtain fewer resources from oil, the role of manufacturing industry will become still more important. I welcome the greater attention that the Chancellor is giving to the manufacturing industry. Nowadays he frequently mentions improvements in manufacturing industry. The past year's improvements have been improvements on a very poor level indeed, as is evidenced by our experience in our constituencies, but they are improvements nevertheless. We can only hope that we shall make up some of the ground lost over the past eight years.
Perhaps I should draw attention to the report of the Treasury and Civil Service Committee and pay tribute to the Committee—as I usually try to and as we all should —for producing its report quickly and in difficult circumstances. Although the Committee's conclusions are not unanimous, the analysis is especially useful to us. The list of specialist advisers is also impressive. In my experience—indeed, in the experience of all those who have served on the Select Committee — advisers are prepared to undertake work at inconvenient times for very inadequate reward. The Select Committee can still select the finest advice available and that is cause for congratulation. We have people outside the Government machine who are prepared to give advice comparable to the advice that the Chancellor received in quality, although not in detail. I note sadly the absence of an agreed report. I know that the report clearly sets out the different views, but these can often be obtained from a variety of academic, economic and journalistic sources. It is most valuable when a Select Committee puts aside its partial affections and tries to put suggestions to the House to overcome some of the differences that exist and put matters in a different context. A Select Committe is the only body that can do that and, if it does not, it is failing in an important objective.
The Chancellor spent most of his time — not unwisely, although I would have preferred to hear something more on public expenditure — drawing attention to the importance of the world economic situation. We must all believe that for the next 12 to 18 months that situation will be uncertain at best. In his evidence to the Select Committee, replying to question No. 124 on 9 December, the Chancellor said:
In the first place I see no sign at the present time of the world going into recession. All the recent figures that we have had so far do admittedly relate to the period before the stock market collapsed.
I detected a little more pessimism in his comments this afternoon. The Chancellor said that he saw no sign of tine world going into recession. We hope that he is right, although it all depends on what one means by recession. There will certainly be a slowing down of world growth and a reduction in United States activity. In the short-term it is likely that oil will produce less revenue and, more


important, that its beneficial effects on our balance of payments compared with those of oil-importing countries will be weaker.
It is clearly accepted that in the short-term, and at the time of the Budget, the Chancellor will have money to spend. He will have perhaps £3 billion and perhaps as much as £4 billion or even £5 billion. He wants to use that money to lower the standard rate of income tax to 25 per cent. and the higher rate to 50 per cent. He would dearly like to end capital gains tax, which, following its emasculation, raises only about £1·3 billion—not good value for the amount of work involved. I would dearly like it to be increased but I realise that it is unlikely that we shall increase revenue from capital gains under this Government. The Chancellor would like to reduce part of the cost of mortgage tax relief, which stands as a fiscal rebuke to his failure to achieve the greater tax neutrality that he has at heart. The abolition of capital gains tax and the reduction in the cost of mortgage relief are not likely to feature in the Budget resolutions. What comfort the Chancellor has stems from the hope that the incidence of mortgage tax relief may be reduced due to reductions in income tax.
I query the Chancellor's proposed use of the resources available. At present, we have a well-planned consumer boom. No one can doubt the tactical experience and expertise that the Chancellor has brought to bear in these matters. He planned the boom for the election and it has not quite got out of hand yet, which, in itself, is an achievement that has not often been equalled. Nevertheless, an increase in consumer expenditure is planned in 1988. It is expected that GDP will increase by 2·5 per cent. and consumer expenditure by 4 per cent. The expected increase in manufactured imports, which is already being realised, is a consequence of that.
The major budgetary question this year is how to spend the money from a reduced public sector borrowing requirement. Faced with the possibility of a world recession—at best a downturn in world activity and a consumer boom at home—it would be folly to couple that with tax handouts that would increase consumption further and thus increase manufactured imports and worsen our balance of payments. It would be far better to use that money now in the interests of the long-term future of manufacturing industry and to improve the serious economy, which we shall need to support us in any difficult times ahead—and there may be difficult times ahead. This is not the time to be spending money in consumer booms following the election consumer boom. As my right hon. and learned Friend the Member for Monklands, East said, investment in education, training and health can all be useful. What we should not do is to spend the money in a way that will only lead to a further import boom in an attempt to meet the Chancellor's requirements of tax rates of 25 per cent. and 50 per cent.
I should also draw attention to the White Paper "DTI — the department for Enterprise". I understand Ministers' desire to direct expenditure on industry into the most worthwhile projects. Ministers have always felt that they need greater control of the money that they have available—in regulations and statutory instruments to set out the ways in which the money available can be spent. They frequently find that the money does not go for the purposes for which they wish it to go. They try to target

it and ask, "How can we ensure that this money goes for this purpose?". That is an understandable and often worthwhile desire. However, it is easy to assume that one can move from that to giving civil servants the discretion to decide who should have how much and for which purpose. It is easy to assume that Whitehall knows best and that the civil servants handing out money to supplicants from Ashton-under-Lyne will be far-seeing officials who can size up a chemical project or assess the value of an expanding furniture manufacturer. All that I know is that such civil servants are limited in number and there are not all that many to be found in the Department of Trade and Industry. I do not question the ability or dedication of civil servants; I only wish that the Government would say the same more widely. However, we do not breed such people in any numbers.
I would wish particularly for more movement in and out of Whitehall to provide a greater degree of cross-fertilisation, but there is little sign of that as yet. We need to know and understand the civil servants with whom we are dealing and the responsibilities and vast sums of money that we are giving them to see the dangers that may arise. We need to face reality and realise that a knowledgeable embattled supplicant will often find himself face to face with an eloquent but under-informed official who will be making decisions that may be momentous for the life of the company seeking assistance.
The House will know that the Public Accounts Committee is anxious that civil servants are not placed in a position where the temptations of fraud and corruption are likely to occur. We are conscious that the combination of a dissatisfied civil servant on the one hand and a company in difficulty on the other is a real threat to the probity of the Government service, of which we are rightly proud. Once standards decline they are immensely difficult to reinstate, as many other less fortunate countries have found. We could well arrive at a position where discretion incurs not only the dangers of poor investment but the perils of corrupt decisions.
There used to be advantages in the regional employment grant. Indeed, there were advantages with the investment grant, and I was a great upholder of its value. One advantage was not that large beneficial investments were made that otherwise would not have been made—although that undoubtedly operated on the margin and we must not underestimate the importance of that — but that money went into manufacturing industry to modernise it. Now we are reducing the amount of money given and are relying on the expertise of Whitehall.
I look forward to the Chancellor of the Exchequer continuing his passage through these matters and coming to understand even further the importance of manufacturing industry in the long term. As I said, there could be uncertainties ahead. The sure way forward is to use that money for long-term investment. That is the lesson that I hope the Chancellor will be absorbing over the next two months.

Sir Peter Hordern: My right hon. Friend the Chancellor of the Exchequer rightly referred to the strength of the economy. I commend him for the successive improvements in the economic strength of our country over the past few years.
It is not suggested or proposed in the Autumn Statement that the same rate of advance that we have


enjoyed over the past year or two will be seen again. As the House knows, the forecast is for a slower rate of growth and an increasing deterioration in our balance of trade. I accept that it is still a small proportion of our GDP, but nevertheless the relative deficit in our balance of trade is certain to increase.
One matter that concerns me is confidence. Last October we observed a sharp fall in the stock market. My right hon. Friend the Chancellor was right to address himself to that problem and be as bullish as he could about our future prospects. In this mood of international cooperation, it is doubly important that careful use be made of language when criticising our allies. I raised this matter in a speech just before Christmas. I could not then, and cannot now, see any point in criticising President Reagan so volubly as happened in my right hon. Friend's Mansion House speech. What was the point of it? If it were because the President and Congress were not aware of the difficulties arising from America's internal deficit, I would be amazed. It is not as though my right hon. Friend was ignorant of the fact that America's constitution made it difficult for the President and Congress unanimously to agree on what should be done. I regret that criticism, because it affected confidence then, and that effect still persists.
It is important to understand the options that exist for the United States, because that is where the problem lies. The problem concerns the United States' internal and external deficit. My right hon. Friend and others have frequently told the Americans that they must put their house in order and to do so by various uncomfortable measures. We should recognise that one of the ways in which America can improve its position is by allowing, for however temporary a period, a continuing fall in the value of the dollar in relation to other currencies.
With regard to the effect of the fall in the value of the dollar in relation to other currencies, only 9 per cent. of America's GDP is involved in imports. It is much less of a sacrifice for the United States to allow a fall in the value of the dollar relative to other currencies. Furthermore, it is bound to be beneficial to its manufacturing industry to have less competition from Japanese companies and other industrial imports. A substantial proportion of its imports are dollar imports.
I remember a book by Mr. Servan-Schreiber in which he complained about the level of United States' investment in France. Now that there is a large American deficit, substantial sums of money are being invested in the United States. The criticism then was that the American dollar was all-powerful: but now the dollar is criticised for being far too weak. There must be some consistency in these matters and we must understand that an attack on the Americans and the way in which they pursue their affairs will damage confidence. With regard to markets, the question of confidence is very important.
I wish I could share my right hon. Friend's confidence about working with other countries to prop up the dollar and keep the deutschmark and yen in their proper place. The movements are so great and the pressures so large that only if the natural course of events is allowed to take place and money allowed to flow freely where investors wish it to go will the position right itself. The dollar trade deficit must eventually be met by willing investors. It is unlikely to do so if investors think that the dollar is being propped up at the wrong price by a combination of central banks. They will wait until the crisis is over and the dollar finds

its own level. There is a new special drawing rights agreement between the United States and Japan to keep interest rates low, which I am sure is beneficial. On any ordinary investment view, dollar assets, particularly manufacturing assets, are cheap compared with Japan.
It may be that the dollar still has further to fall, but the time will come when investment in the dollar will prove to be most productive. It is evident that British firms think so because British investment in United States' firms has more than doubled over the past year and reached a figure of $30 billion. The dollar will find its own level, whatever the central banks may do and despite the agreement to make what have proved so far to be expensive purchases at the wrong price.
I recollect a period — the sight of the right hon. Member for Blaenau Gwent (Mr. Foot) reminds me of this —when the Labour Government talked with glee about catching the speculators. I remember talk about the gnomes of Zurich and making their pips squeak—or it may have been the right hon. Member for Leeds, East (Mr. Healey) talking about Conservatives. It was said that the speculators would be caught by the actions of the central banks and that that would solve the problem. I hear the same sort of language now, and it fills me with dismay. I regret to say that that was not the solution to the problem.
What are we proposing that the Americans should do in an election year? This is the course of action that we are proposing they should take. First, they should cut public expenditure; secondly, they should raise taxes; thirdly, they should raise interest rates; or any combination of those. As my right hon. Friend said, the United States domestic economy has not been adequately reined back. The President has a saying: "If you want to try anything out, try it out on the folks in Peoria." If the folks in Peoria were told that the British Chancellor of the Exchequer is telling them in an election year that they should reduce their public expenditure and raise taxes or interest rates, I think they would probably ask him to pass that one across them again. The options for the Americans are rather different and they may be rather more uncomfortable for us than for them if they allow the dollar to fall somewhat, as it may. The dollar price means more to us than to the United States.
We have a monetary policy—I find it difficult to understand these days, and that is not through want of trying—and we have an exchange rate policy which aligns us neatly with the deutschmark. In the absence of EMS—I am in favour of us being allowed to join the EMS—at least we are aligned to the deutschmark. What would be the effect of a reduced dollar deficit and an increase in United States exports, which is what we are urging the Americans to do? We cannot imagine that a reduction in the United States deficit will happen without some pain to other countries. We must look at the likely consequences of that. Of our £8·5 billion-worth of imports from the United States, £7·1 billion were in manufactured goods. That represents only 10 per cent. of our imports, but when one thinks of the amount of American exports to the European Community, which represents well over 20 per cent., and of the fact that 50 per cent. of our exports go to the European Community, one sees that any substantial improvement in the United States level of exports is bound to be felt by the European Community.
When we are talking to and lecturing the Americans, we should recognise that the effect may not be entirely pleasant for the European Community, and certainly not


for us, because, as the House knows, we are forecasting a higher trade deficit during this year. We are also forecasting the most rapid rate of growth in the Community, so we may find a progressive deterioration in the balance of trade, as has been suggested in the Autumn Statement. To the extent that the United States position improves, more strain is bound to be felt within the European Community.
On the stock market collapse, it appears that, during the past five or six years, when the economy has been performing well, it has been helped along by the avid appetite of the United States for imports. We and other countries have benefited greatly from that avidity, but it will no longer be there, which will cause a strain on world trade. We know the difficulties with Japan and negotiations in West Germany. I remind the House of what happened in the stock market collapse in 1929. In 1930, there was a creditable recovery in share prices, but then there was a pressure for trade restraint on every side, which started with the Smout-Hawley Act and went to tariff restraint by Italy and France, and by 1932 we had our own tariff wall through the Ottawa agreement.
The same pressures will start again, not directly with tariff restraint but with voluntary export restraint, which now covers about 50 per cent. of all world trade. I suggest that this is the time to negotiate with other countries to ensure that we open up our markets to the United States and allow the progressive liberalism of world trade. If we were to find the pace of world economic growth slowing down, which is quite likely to be the case, it is up to those who expect to find an improvement in the United States trading position to open their markets correspondingly, and the greatest responsibility for that rests on the European Community. It appears to me that this could be done most effectively by revising the common agricultural policy as early as possible.
I recognise what the Government are doing, but to lecture the Americans when we have the nerve to pile up surpluses amounting to £13 a week for every family in the country, and forbidding the free movement of other agricultural produce into the European Community, is nonsense. We must be very careful during the next few months to see that what happened in the early 1930s on restraint of trade does not happen again. It will require a good deal of leadership and steady nerves. If we are to be certain that the stock market collapse does not lead to a recession, we must open up our markets. The European Community must play its part, and so must we, not by buying dollars at the wrong price but by opening our markets in Europe; in other words, to bring in the old world to redress the balance of the new.
The crisis is not over yet. I would like to think that it is, but I do not believe it is. We need the skill and patience which the founders of the European Community showed in gaining the unity of Europe. We need to show skill, patience and perseverance in dismantling the barriers for the movement of goods and services throughout the world. The task needs leadership, which we and our partners in Europe are uniquely qualified to give, and I hope we give it.

Mr. A. J. Beith: The House enjoyed the commentary of the hon. Member for Horsham

(Sir P. Hordern). I agree with his conclusion. I am sorry that the Chancellor is leaving, because I wanted to give him some information. I have been conducting some market research on an issue that I know concerns him. If he is thinking of extending VAT in the Budget, he will get as critical a response as did my right hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) from my hon. Friends and me. I suggest that he should not contemplate it for a moment.
Having left the Chancellor with the fruits of my labours of the past couple of days, I wish to say that the hon. Member for Horsham took a curious view in criticising the Chancellor for what he said about the American economy. It may be as well to rein in the Chancellor a little for his desire to lecture the rest of the world. Perhaps he took his example from the Prime Minister and presumed upon the Prime Minister's influence with the American President, but there is another side to the scenario which the hon. Gentleman painted.
If the lack of confidence in the United States continues, the dollar continues to slide and Wall Street — I mean those who use Wall Street as a means to invest their money — continues to doubt the willingness of the American Administration to cope with its economic difficulties, the end product is recession of a kind which will end up in this country.
The hon. Gentleman is right to point out that we shall pay a price for the correction in the American economy, but we cannot stand back and say, "We do not mind what you do; we do not care what happens in the American economy". Still less can we fail to show some sympathy for those in the United States who are trying to get more sensible economic management. One of the President's mottos is, "Defence is not a budget issue; you spend what you need". Attractive as that may be as a concept, it plays havoc with control of public expenditure and demonstrates that everything cannot be blamed on Congress because some of that spending was generated by the President.
The economy has undergone a significant recovery and there have been some worthwhile achievements. The House should recognise the good things in the Chancellor's more recent economic management, as well as the good luck he has had. We must recognise that millions of people have a different perception of this. Many of them remember the industrial destruction which preceded the current growth and from which the current growth is measured. Many of them were the victims of it —those who lost their jobs in that industrial destruction and those whose hopes were destroyed. Then there are those who are the victims of unemployment or low wages, who do not see any of the rich benefits and pickings that are to be found in many parts of the country, and those who are in regions where the feeling of economic prosperity is not present or is confined to a few prosperous pockets.
It is very easy to view the present economic conditions with equanimity and, indeed, some enthusiasm from Westminster, but it looks very different in other parts of the country. That is why the Government's public expenditure proposals are of considerable interest, even if that interest has been overshadowed by this week's proposals on regional aid in the Secretary of State for Trade and Industry's White Paper. This is not really the occasion to debate that; we shall have an opportunity to do so in a week or so. However, it has caused great concern


and anxiety that, in reality, regional expenditure will go down, because many requests for selective aid will be refused. The loss of automaticity will be seen as a marvellous opportunity for a reduction in public expenditure on regional aid, and it is impossible to conceive of the system resisting such an opportunity when it is presented.
The right hon. Member for Shropshire, North (Mr. Biffen) spoke very forcefully, and with widespread support, about the Health Service as one of the key expenditure issues that we must face. He was right to insist that there is a political judgment to be made — a political recognition that the people of this country have such a high regard for their Health Service and that they are prepared to make sacrifices to see it maintained at a reasonable level. The present degree of decline in the Health Service evokes real anger right across political opinion. Anxiety is not confined to those who support Opposition parties; it is strongly in evidence among those who voted for the Government.
Several factors advanced by the right hon. Gentleman as relevant to the current debate are indeed important. We must have a debate on the financing of the Health Service. It is not enough to imply that the problems would go away if we increased funding significantly. The right hon. Gentleman put forward a bold claim for, in effect, expenditure of £3 billion on the Health Service. However, even if that were carried out, we cannot pretend that there would be no people waiting for operations and no waiting lists in particular specialties or parts of the country.
We can get rid of some of the waiting lists. However, it is inherent in the nature of the Health Service that difficult choices are posed, and the more that medicine advances, the more difficult those choices become. In the past, politicians have failed to face up to them; they have preferred to let them be coped with within the medical system —and, in particular, to leave them to doctors—on the understandable ground that there are merits in clinical freedom. The fact remains, however, that, given the present capacity of medical technology, decisions made purely by doctors cannot answer the public's demands for access to high-technology medicine, and that system cannot cope with the sort of judgment that may need to be made about the relative priorities given to preventive and high-technology medicine. The difficult choices must be made by politicians, and there must be debate about them.
However, the capacity of the Health Service to cope with that debate and, indeed, with the issue of better management simply is not there if it is suffering severe restraint. Such restraint is now taking place. Although the Government can point to real increases in Health Service expenditure, the number of people in an aging population needing the Health Service is larger, and the development of medical technology is another factor. In the present climate, better management of the Health Service cannot be achieved: indeed, the present climate has given efficient management a bad name. Any health authority that tries to organise its resources effectively is up against a climate in which so many other things are happening, for purely financial reasons, that it has difficulty in justifying any decision that it may make.
No worthwhile debate or development can take place unless the Health Service is better funded, and that applies particularly to NHS pay problems. Health authorities have had to cope with insufficient funding for nationally

agreed pay increases, and the Treasury and Civil Service Select Committee has pointed to the difficulty that arises when those pay increases are only ever dealt with from within the Department's own budget, and never compared as a potential expenditure with spending in other Departments.
We must have some way of discussing from time to time whether an increase in the funding of, for instance, the roads programme is more important than an increase in nurses' pay. The social and political judgments that have led to attempts to deal with chronic low pay in the Health Service must surely have implications beyond the existing budgets of that service. The Select Committee was right to point that out in its report, and I commend it for doing so —I was not present at the meeting at which that passage was put in.
The Government must respond to what is being said about the Health Service. That is the key message that the Chancellor must receive from the public expenditure part of the debate. However, this is also an opportunity to review what has happened since the Chancellor made his Autumn Statement. I have some sympathy with him, because forecasting what would happen to the economy just after Black Monday was a bit like forecasting what would happen to our parties' merger prospects at about breakfast time yesterday: it was not exactly a promising time at which to make prophecies.
Some of us said at the time of the statement that the Chancellor would have to revise or reconsider his assessments, especially because he was so optimistic about the international response that he was expecting. He was pretty bullish about what would be done by the Americans, the Germans and the Japanese. The hon. Member for Horsham spoke about the dangers of the previous avid American purchasers of goods manufactured in Britain ceasing to be part of the picture if measures are taken in the American economy. The counterpart of that is that we want avid Japanese buyers for British goods. We want to see an expansion in Japanese domestic demand, and we welcome the efforts that the Foreign Secretary has been making to challenge the Japanese Government on such matters as trade barriers.
The Chancellor has not said much today to revise the extraordinarily optimistic assumptions that he made then. Is he not concerned by the dangers of an overstrengthening of the pound against the deutschmark? He has not said much about that today either. Is there not also a real danger of spiralling world recession, with collapsing commodity prices feeding through to serious problems for Third world countries, which are already beset by the debt problems to which the Chancellor has made some effort to propose solutions? There has been support for his initiatives from both sides of the House, especially for those relating to Africa, but the problems are getting worse, and the measures that he was advocating a couple of months ago will not be adequate to deal with them.
In the light of the events of the past few months, the questions about the overall management of the economy that the Chancellor must consider relate to his aspirations for tax cuts, and the opportunities opened up to him by a public sector borrowing rate that is at historically and internationally low levels. While the economy is relatively healthy, it might be a wiser option to combine some investment in key services—the Health Service is one of them, but there are others, such as housing and home improvement — with taking steps against recession at


home. At the same time, the Chancellor should seek the international co-operation without which we cannot reduce the risks of recession being imported from abroad. Clearly, it is more important than ever for Governments to be prepared to act internationally, but there is also a national dimension.
The Chancellor would do well to heed the warnings of the Centre for Economic Policy Research, which said in a report this month:
continued failure to correct the underlying problems courts the risk of a slide into recession throughout most of the world.
The record of the last couple of months on international co-operation is pretty inadequate. Europe's future is threatened by prospects of slow growth and high unemployment, and the Chancellor's apparent satisfaction with the amount achieved so far is simply not borne out of any objective reading of what has been happening. If the demand from the United States economy declines, Europe must replace that lost demand, either from within itself or from the few other potential sources of purchasing power, such as Japan. That cannot be done without considerable international effort and co-operation.
Many people in this country have worked very hard to win such improvements as have been made in the economy. Those improvements are not won primarily by people sitting in Westminster or in No. 11 Downing Street; they are won by industrialists and by workers on the shop floor. Much of the price has been paid by people who are not at work, because they have no jobs, and have been the victims of the restructuring of industry.
Many people have much at stake in this country and abroad in those Third world countries where international help is needed. Considerable effort must be made to ensure that the events that took place on Wall Street and during the stock market collapse are not simply the beginning of a long saga, which would mean that the very confidence referred to by the Chancellor would not be induced and that, in the coming years, the suffering to which I have referred would be magnified.

Mr. Terence L. Higgins: I greatly appreciate the kind remarks that have been made about the report of the Treasury and Civil Service Select Committee. The delay in setting up that Committee was immensely frustrating because it happened at a time when we were passing through perhaps the most turbulent set of events in international monetary affairs that we have witnessed for many years. None the less, I hope that the report that was produced, under considerable pressure, has been useful to the House.
You have asked, Mr. Speaker, that we should be brief and, therefore, I wish to restrict my remarks to two issues. First, I shall deal with the mechanism for determining public expenditure priorities and, secondly, I shall say something about exchange rate policy, which was the main item in the Chancellor's speech.
We are in the middle of a period of discussion on public expenditure. We have had the Autumn Statement and now we are having the debate. I gather that we shall soon have the public expenditure White Paper, which will spell out the detail. The Select Committee will, of course, then wish to take evidence on that White Paper and make its report.

We shall have further debate on the White Paper after that. In that time I hope that I can persuade my right hon. Friend the Chief Secretary to the Treasury that we need to look carefully at the mechanism for determining public expenditure priorities. My right hon. Friend the Member for Shropshire, North (Mr. Biffen) was absolutely right to say that the determination of those priorities must be based on a series of political decisions. That is inevitable, but it does not mean that we should not try to make the mechanism for reaching those decisions as efficient as possible.
The present situation consists of bilateral discussions between the Treasury and the spending Departments and, if necessary, recourse to the Star Chamber. That is followed by a quick Cabinet endorsement of the outcome with a great sigh of relief. That is not an effective way of determining priorities because there is no proper overall review of them.
The Select Committee has drawn attention to the problem that occurs when a Department makes a claim for more resources that is large either in relation to its total expenditure—which may be small in some cases—or in absolute terms. Over the years, we have had problems of that nature. Some years ago there was a problem concerning Sir Keith Joseph and the student grants. There was great controversy over a trivial sum of money when the Treasury insisted that savings should come from within the same Department. I believe that that attitude is the root cause of many of our problems. We had a similar difficulty at the Foreign Office when it had to find savings that had difficult implications for the BBC's overseas services. The Health Service is a classic example of the problem.
The Committee has pointed out that there was a large demand to meet the increases in nurses' pay. The decision was taken that savings would be found within the DHSS. It is true that a large chunk of the increase for the nurses' pay came from the reserve, but none the less savings have to be made within the health Department. That is the cause of many of our problems. From a constituency level we are aware that the increase in nurses' pay was not fully funded and that there was no scope for finding savings elsewhere, with the result that wards were closed. Such action represents an inefficient way of operating because the overheads run on just the same. I believe that the right approach would have been to seek the necessary savings across the board from other Departments and not simply from the DHSS.
I wish to comment on the statistics that have been bandied about on this issue. I do not believe that it is right to say that there has been an increase, in real terms, when allowing for inflation. We all know that the relative price effects of nurses' pay, pharmaceuticals and so on are significantly larger than the rate of inflation.
Mention is also made of expenditure on the Health Service in relation to GNP. I believe that the Select Committee took a balanced view on that issue. We drew attention to the substantial, unprecedented increase in NHS resources that has taken place. We pointed out that, as a percentage of GNP, resources had increased from 5·37 per cent. in 1979 to 6·12 per cent. in 1986. That is true of the past, but let us consider the plans for the future.
The right comparison is NHS expenditure adjusted by the Government's forecasts of inflation and the GNP forecast, which includes the inflation effect. If we make that comparison, we discover—I refer the House to the


table that the Committee published—that the proposed increases in Health Service expenditure are significantly smaller, reducing to 1·2 per cent. of GNP. In other words, Health Service expenditure is not going up in line with GNP. I do not believe that the House would accept such an assessment of priorities.
Therefore, it is tremendously important that if there is a large increase in the resources demanded by a Department, consideration should be given to a broader approach to where those savings can be found. I accept, however, that such savings should first be sought within the Department. I accept that my proposed approach would not be easy, because the whole process would be opened up. The Chief Secretary would have to trot round from Department to Department saying, "I am sorry, but there has been a big increase in nurses' pay and you will have to cough up something." I accept that that would not be easy, but the present arrangement has run us into difficulties and will continue to do so. I do not believe that I am being naive and I believe there is a lesson to be learnt.
The Chancellor spent much of his time on intervention. Clearly—as my right hon. Friend said in evidence to the Select Committee—there has been a change of policy. Previously, the policy was to intervene only to smooth fluctuations in currency movements. That is different from saying that we will seek to maintain a level of rates in the face of what the markets would otherwise produce. In this regard the Louvre agreement was not sufficiently explicit. The present Committee and its predecessor noted that fact, and it is clear that the agreement has not operated in the way in which the Chancellor of the Exchequer had hoped.
On page XII of the Committee's report we point out that the amount of intervention, in broad terms—the periods are not precisely the same—by the United States monetary authorities totalled $5 billion whereas the intervention by the other major participants totalled $95 billion. Therefore, the United States contribution to support its currency has been small in comparison to what everyone else has put in. We point out in our report that the resources available to the United States to sustain intervention operations are inadequate. The Chancellor has also pointed out that there was a weakening of resolve by the United States.
We are intervening in the currency markets to support the United States dollar, yet the United States Government are vacillating. That country is not a major participant in the operation and its resources to fund such an operation are inadequate. Intervention is an extremely dangerous operation on which to embark and it has serious cost implications for Britain.
The Select Committee and the Chancellor agree that there is a case for seeking underlying stability. I do not believe that such stability can be achieved as a result of intervention, because that means adopting a speculative position against considerable market forces.
Finally, I wish to pick up a point made by the right hon. and learned Member for Monklands, East (Mr. Smith). He does not understand the market philosophy. It is quite different to intervene in the way that I described, when the market has sought to establish a position and one is trying to change it. The market is determined by supply and demand, and intervention may affect the demand. If one wants to establish stability on a more permanent basis, one must seek to influence the underlying forces and powers that influence the market. In that respect my right hon.

Friend the Chancellor is right. It has to be done by differential interest rates or by fiscal policy, or by a combination of the two.
Therefore, while I understand the need for cooperation, and pay tribute to the way in which my right hon. Friend has worked hard in that area, I do not think that it is the right approach to say that there is no hope of getting agreement on interest rates and fiscal policy unless there is agreement on intervention. For reasons that I have already mentioned, I consider that intervention is a temporary palliative. It is not the approach that is needed to establish more permanent stability.
The Chancellor was right to adopt an approach that sought co-operation, but the policy of intervention is dangerous; it may turn out to be expensive and does not deal with the underlying problems. In the light of what he said this afternoon, I urge my right hon. Friend to concentrate on the problem of co-ordination in a broader and deeper sense—on interest rates and fiscal policy, rather than on intervention. I do not think that it has been effective; it was a change of policy which was not advisable.

Mr. Bowen Wells: Does my right hon. Friend agree that the reason why the United States was not willing to intervene in the market to the extent which was initially agreed was that the coordination policy of which my right hon. Friend spoke was not in order at that time? Germany and Japan were unwilling to expand their markets sufficiently to enable the United States to resist a further fall in the dollar.

Mr. Higgins: That may well be so. However, the crucial point is that, even if the intervention had been coordinated, it may not have succeeded if the underlying factors had not been dealt with.
I hope that my right hon. Friend the Chief Secretary will give attention to my point about public expenditure, and that we can pursue those issues in the Select Committee. I hope that my right hon. Friend the Chancellor will continue with a policy that, although hazardous in some respects for the United Kingdom, because of international imbalances, has been vastly preferable to earlier economic policies.

Mr. Michael Foot: During this debate, and at the time of the Autumn Statement, there has been talk of a national recovery and indeed, in some cases, of an economic miracle. In this debate I wish to present the contrasting situation in my constituency and in many parts of Britain. No economic miracle has yet appeared in those areas and no economic recovery which could be dignified with those terms. We still have a level of economic activity far below what it was in 1979, and a level of unemployment higher than it was in 19'79. Therefore, it is an insult to talk in those terms and represents a distortion of what is really happening in Britain.
If the economy is being run with such success, why are we confronted day after day, case after case, with fresh evidence of the squalor, the shoddiness, the injustices and the dangerous undermining of well-tried institutions that are most essential to preserve civilised society in Britain?
I know that many right hon. and hon. Members wish to speak in the debate, but I should like to refer briefly to


some of those examples, the most notable of which is the National Health Service, which already has been mentioned in the debate by Opposition Members and others. The presidents of the royal colleges showed that they knew better than the Prime Minister what was happening in the National Health Service.
The right hon. Member for Shropshire, North (Mr. Biffen) made some extremely pointed and important remarks on that subject. However, I should like to give him one warning. The right hon. Gentleman quoted from a particular pamphlet. It was once said of Bernard Shaw that he was a good man who had fallen among Fabians. I hope that the same fate does not befall the right hon. Gentleman, who quoted from a Fabian pamphlet as if it was an authoritative statement on the subject, and I hope that he will think again.
Most of the problems with the National Health Service are not novel. The same problems and calculations existed in 1948 when Aneurin Bevan established the National Health Service. I remember it better than any other hon. Member because I am the only hon. Member here who was present during those controversies. The controversies were about how one would unloose an infinity of demand. Had Bevan listened to those arguments, heeded them, accepted them — they came from so many quarters, from Conservatives, Liberal Benches and Labour Benches — the National Health Service would never have been founded in 1948. We have a Health Service because he said that we must represent the claims of that service above any other area of social services, and because he presented them with such daring, comprehension, understanding and compassion the Treasury was prepared to listen.
The problems are not easily solved now, but the sort of figure that the right hon. Member for Shropshire, North mentioned should be presented to the Cabinet today. Perhaps one of the reasons why the right hon. Gentleman was removed from the Cabinet is that the Prime Minister feared that he would present that argument. I hope that some other members of the Cabinet will do that, but I doubt that they will present it as persuasively as the right hon. Gentleman could present it. If they do not, they will be overwhelmed, because the demand throughout the country is growing strongly all the time. The Government will have to yield. The fact is that £200 million is insufficient. The Government will have to yield much more at the time of the Budget, and the sooner they do that, and the better grace with which they do it, the better it will be for the health of the National Health Service and of the nation.
The National Health Service is not the only example where the screw has been turned. According to the figures, there has been an expansion in the total amounts allocated, but elsewhere — I speak for a constituency where we feel the consequences of those measures—the Government have imposed cuts which are taking effect now. But the Government still dare to talk about a national recovery. During the next few months some of the special cuts that they have inflicted on social security will be brought into operation. They will be applied through discussions such as those that took place yesterday in the House about child benefit.
Other provisions will be applied to cut what many hon. Members believed had been established as the best social services to deal with family problems. Conservative

Members have said during the past few days that the demand for family allowance was an all-party demand at the end of 1945. Child benefit was a great improvement on the family allowance. It was consolidated by the last Labour Government on a more ambitious scale so that child benefit was paid to the mother without any means test, and sustained at its original value. All those principles are being undermined by the Government. That is a very serious matter. It will have serious consequences, particularly in areas such as mine where people are dependent on these provisions. The vast increase in homelessness in many big cities and in other places is another example. So what is meant by all the talk of a national recovery?
Then there is what the Government have done to so many other institutions, including universities. Surely at a time of technical advance the Robbins principle of a university education for every boy and girl, man and woman, who can take advantage of it should be carried out. That was one of the finest principles that came out of the second world war. It was accepted by us all. I would have thought that it was a civilised principle of the first order. The Government have done nothing more disgusting than to abrogate that principle. There is great competition in that sphere. It is dreadful that people who themselves have apparently had a first-class education should introduce measures that will deny a similar education to other people who are just as capable of benefiting from it. [Interruption.] Let those who wish to deny what I say talk to the leaders of the universities and people at universities who have been protesting against the policies operated by the Government over many months. There is talk of the Government withdrawing some of the offensive clauses from the Education Reform Bill. I hope that they will do so.
Another part of the Government's programme which affects people directly is the extraordinary White Paper published on Tuesday by Lord Young and his Department. Huge sums of taxpayers' money are being used to publicise the document as though it had been accepted by the House. When one reads the document, one realises how taxpayers' money has been misused to publicise Lord Young and his Department. The explanation I offer to the House is that the document was not prepared originally to be presented by Lord Young's Department but would have been presented by him if he had been appointed chairman of the Conservative party. He seems to have decided that, as he had drawn up the document, he might as well get the taxpayers to pay for it.
If hon. Members think that I am exaggerating, let them look at page 2, where it is explained that 1979 was supposedly the turning point of the century in our economic life. Lord Young is not so modest as to think it was a turning point just in the postwar period, but in the century. In glorifying his achievements and his prospects Lord Young does not even mention that North sea oil has made some contribution to the economy over the past few years. That is not even mentioned in the document, which supposedly describes the whole economic position of the country.
The same Lord Young comes forward with proposals for changes in regional policy. I am not saying that the previous policy was perfect; of course, it was not. Many cuts imposed under that policy hit areas such as mine. That


is why we pleaded with the Government to listen to what we had to say before they introduced a new regional policy.
The idea of having discretionary grants as a substitute for guarantees for different industries is dangerous; it is a principle that is difficult to work sensibly. It is not only we in the Labour party who say that. Three ex-Ministers from the Department of Trade and Industry asked questions about it yesterday—the right hon. and learned Member for Richmond, Yorks (Mr. Brittan), the right hon. Member for Chingford (Mr. Tebbit) and the right hon. Member for Henley (Mr. Heseltine). I have to be careful about applying zoological terms to the right hon. Member for Chingford—if I do, I may get complaints from the Animal Welfare Trust—but when three worms turn on the same afternoon, asking the Minister to look properly at the proposed change, the Government ought to take note.
We are deeply concerned about the Government's proposals in the area I represent. The changes will apply not just to areas which have been badly hit but to considerable parts of Wales, Scotland and the north-east. There should have been much more discussion about how to have a more effective regional policy.
One obvious way which we had worked out and which was being applied in 1978 was special development assistance for the areas which were hardest hit, the areas threatened not just with a 2 or 3 per cent. increase in unemployment but with a doubling of unemployment. Unemployment went up to the then appalling figure of 12 per cent. in areas affected by the steel crisis. But over the next three or four years, under the wonderful recovery programme of the Conservative Government, unemployment went up to over 20 per cent. What we sought to provide under the Labour Government's regional policy was special development assistance over and above the general development area assistance. It worked. There were plans for getting new industry into my area. Other areas too had special development area status. It enabled us to get on with the job of rebuilding, as local authorities and industries are eager to do now. We are determined to rebuild industry. We wish the Government had listened to what we had to say about how a sensible regional policy should be worked out.
Even at this late hour, if only Lord Young can set aside his propaganda leaflets, cannot we have a proper discussion? Most of the affected areas are represented by Labour Members and by Labour local authorities that are passionately eager to join in the task of rebuilding. The idea that local authorities are hostile to trying to get on with this major task is ludicrous. To get more jobs is the number one priority of many local authorities. But, partly because of their insane hatred, detestation or suspicion of local authorities, the Government have not been prepared to join in such activities. I hope the Government will consider that afresh.
That is just another example of how fraudulent is the claim that we have had a national recovery. Whatever else there may have been, it is certainly not a national recovery. Until it is national, the Chancellor of the Exchequer should be more reticent in the claim that he makes for himself and his achievements.
The hon. Member for Horsham (Sir P. Hordern), with his usual delicacy, properly rebuked the Chancellor for lecturing the Americans. If, at the beginning of the Reagan regime, the Americans had pursued similar policies to

those pursued by our Government in 1979, 1980 and 1981 there would not have been a recovery in the United States or throughout the world. The world would have been plunged into an even deeper slump perhaps than in 1929. There would not have been a recovery here. The Chancellor thinks that he governs these things, but he is just the fly on the wheel. He thinks that he makes the wheel go round. What happens in the United States economy is far more important than anything he does. Therefore he should have been a bit more careful about looking back.
Some people prophesied what was going to happen in the American economy. Professor Beckerman, an old fashioned Keynsian—which means that he is absolutely up to date; he has got the policies which the Chancellor is looking for for next month — said way back, as anyone can check, before President Reagan came to office, that of course he would prefer a Democrat to be elected, but the incoming American Administration would not carry through a full monetarist policy, as they were claiming they would. Because tax cuts were popular and public expenditure was not popular, they would carry through, not by intention but by accident, a Keynsia n policy of reflation no matter what it might be called.
That is what they did for five or six years, and when the American economy recovered we managed to clutch the coat tails in the last four years. That is what really happened, so it does not become the Chancellor to make a holus-bolus criticism of what Americans may be doing now. The situation may be different, but the idea that economic problems which we have not solved can be solved by encouraging the Americans to go in for a full-scale cut in their deficit is absurd. All that will happen is that there will be the kind of slump that there would have been if the Americans had embarked on that policy six or seven years ago.
This does not mean that I agree with the American policy. I think that they could spend their money much more sensibly. If only they would divert a huge amount of that public expenditure, as they could, from armaments into these other fields, it would be much better for all of us. So I certainly think that we should encourage that. But the suggestion that all economic wisdom rests with the Treasury Bench and the Chancellor of the Exchequer and that all that is necessary is for the Americans to copy what the present Government have been doing is absurd. First of all, they would have to explain which of their policies they wished the Americans to copy—the one that they tried with such appalling results in their first period of office or those that they are following now, although they are trying to conceal the fact that they have come round that far.
I know that several Tory Members are trying to entice them further along that road of sanity and I do not wish to interfere with that process because I think that it could be beneficial for the country as a whole. Some of the benefits of such a policy might eventually get through to the great areas that some of us represent that have seen the tragic failure of the Government to understand what is happening. But Government Members do not come to those areas; they do not know the areas and they do not see what is happening in our places. So we have got to tell them.
In the meantime, I hope that we can stop the Chancellor of the Exchequer preaching to others when he has himself found the right gospel only in the last few weeks. I hope that he will change his habits in a way that may be helpful


to us all instead of causing the kind of injury that might follow the sort of prescriptions that he has been giving in the last few years.

Dr. Charles Goodson-Wickes: I am honoured to have been called to address the House for the first time. It is a special privilege to be allowed to do so in the debate on the Autumn Statement, which has been delayed nearly as long as this speech.
Sitting under the Strangers Gallery tonight is the Conservative Member for Blaydon between the years 1931 and 1935—not, I hope, the last Tory representative for that area. He has been my friend and political mentor for many years. He tells me that in his day one informed the Whips when it was convenient for one to attend the House. The position seems to have been reversed over the years.
I know that the whole House will join me in wishing my predecessor, Michael Havers, now in another place as Lord Havers of St. Edmondsbury, an early return to robust health. It is widely recognised that during his exceptionally long service as Attorney-General he had a formidable workload the success of which remained largely unrecognised owing to its sensitive nature. The burden clearly took its toll upon his health. I am confident that the House will agree that The Times got it right when it described him recently as
one of the straight men of politics
—as noble a tribute as any to which any hon. Member could aspire. To achieve the highest office of precedence as Lord Chancellor, with all its constitutional, legal and procedural duties, only to have to lay down the burden shortly thereafter must have been a bitter blow. In wishing him well, I take the opportunity to thank him for his wise counsel. It is a privilege to follow his 17 years of service as Member of Parliament for Wimbledon.
I wish to depart slightly from the usual convention by mentioning also Michael Havers' own predecessor, Sir Cyril Black. A number of hon. Members will remember his service in the House from 1950, when he gained the seat, for 20 years thereafter. He continues to offer unparalleled and unselfish service to the area with which he has so long been associated. I cannot speak too highly of his accumulated wisdom, which he has been kind enough to share with me. To follow two such distinguished Members, both of whom served Wimbledon so well in their different ways, will present a challenge which I address with understandable misgivings.
The constituency of Wimbledon forms the western part of the London borough of Merton and, although in the popular mind it is associated with the village of Wimbledon, it extends very much further, with an agreeable diversity of people and interests. Let nobody think that it is a unformly affluent area free of social and other problems. On the eastern side of the railway, which bisects the constituency, there are areas of relative deprivation as one moves towards the boundary, which runs along the course of the river Wandle.
Merton has a distinguished and interesting history dating from an Iron Age settlement. Henry VI was crowned at Merton priory and, by marriage, the royal connection continues, as the Princess of Wales' father, also in another place, is the lord of the manor of Wimbledon. His forefathers inherited Wimbledon house by descent

from Sarah, Duchess of Marlborough. It was one of Lord Spencer's predecessors who found himself in dispute with the inhabitants of Wimbledon in 1864. He proposed to enclose the common and subsequent protests led to an Act of Parliament vesting it in a specially constituted body of conservators.
Another parliamentary predecessor of mine, Sir Henry Peek, played an active part in preserving the area for "public enjoyment". The present system continues and I can tell the House that no hard feelings persist. However, the unique status of the common and the method of its funding are likely to produce difficulties in relation to the restructuring of local government finance. But I shall be raising that point with my right hon. Friend the Secretary of State for the Environment on a more suitable occasion.
Wimbledon common has been the site, as well as the subject, of dispute on many occasions in the past. Pitt the younger, while Prime Minister, engaged in duelling on the common, luckily without serious results, before the practice ended in the mid-19th century. The common was, from the time of the Restoration, the site of military reviews and manoeuvres and both the royal tournament and Bisley trace their origins to those events.
The most famous of Wimbledon's inhabitants, however, was a sailor, Lord Nelson, who lived at Merton place in the present south Wimbledon, in his famous menage a trois with Sir William and Lady Hamilton. It was from this house that he left to meet his death at the battle of Trafalgar.
Three other distinguished men of Wimbledon were William Wilberforce, a pioneering Tory who did so much to bring about the abolition of slavery, Baden-Powell, who wrote his "Scouting for Boys" there, and John Innes of horticultural fame, who, in Merton park, founded one of the first garden suburbs.
Merton has a long history of learning and the 13th century statute of the same name was repealed only in 1923. Excellent schools of many types flourish in the borough, as my right hon. Friend the Chief Secretary to the Treasury can testify from his personal knowledge. The influence of various religious bodies is a marked power for good in the constituency, as is the medical work carried out at the Atkinson Morley's and Nelson hospitals.
The constituency is mainly residential with a well-balanced community. The tradition for commerce and light industry, dating from the snuff mills and the fabric works, established by William Morris, persists and flourishes. Several new companies, many with a high technology element, are moving into the district, joining such old companies as leather curriers.
The name of Wimbledon is universally associated with lawn tennis and, in recent times, it has acquired the additional distinction of first division football. Many other sports from golf to greyhound racing are enjoyed and there are also other admirable cultural and leisure opportunities.
I address the House at a time when the funding and functioning of the welfare state has been called increasingly into question. One of the privileges shared by all hon. Members is the opportunity to see at first hand the immense amount of voluntary activity, often unrecognised, carried out in the service of others. Basic human instinct to help those most vulnerable in society is reflected in this voluntary work and in the financial contributions from so many. I like the term "community self-help", analogous with the concept of individual self-help. There


is nothing novel about that. After all, many of our great hospitals and educational establishments started life as charitable institutions.
Although it would be naive to suggest that the private sector and voluntarily raised finance could solve the present difficulties, they nevertheless have their part to play. I see no ideological bar to such funds supplementing the welfare state and hope that there would be universal support for that. A move in this direction would go some way towards satisfying the recent call made by the presidents of three of the royal medical colleges for
additional and alternative funding in the National Health Service".
I noted with interest the arguments of my right hon. Friend the Member for Shropshire, North (Mr. Biffen) in that context.
I speak from some small experience, having been involved with a charity set up in my father's name, which has my right hon. Friend the Member for Castle Point (Sir B. Braine) as president. Among other things, we have provided funds for beds and living accommodation for the families of critically ill children to stay in National Health Service hospitals at times of anxiety. Only this week, we have contributed to the renovation of an underused building at Bart's. That hospital, where I trained, was founded over 850 years ago and it seems illogical that an organisation such as the National Health Service, established barely 40 years ago, should be expected to cope unaided with today's unlimited demands.
If charities, which now have an annual turnover in excess of £10 billion a year, are to play their full part in our society, two requirements must be satisfied—first, the incentives for giving should be increased and, secondly, the funds gathered should be used as efficiently as possible.
On the first point, I must congratulate the Government on their success over the past eight years in creating a climate favourable to charities. The 1986 measures have been described as the best charity Budget that we have ever had. The extension of tax relief to companies for one-off gifts was a major step forward. These are early days yet for the payroll giving scheme for individuals, but many employers, including central Government Departments, have set up the appropriate machinery. However, a new publicity boost is needed from the Government to increase general awareness of the scheme and to spur on charities and their agencies to take advantage of it. Provided that the administrative burden is not too great, income tax relief for individuals on single gifts might also be arranged in due course.
My second point is to urge the implementation of last year's Woodfield report. The inadequacies which it identified in the supervision of charities must be remedied. The question of registration should be tackled to go beyond the endorsement or otherwise of submitted statements of charitable aims. A very small number of cases of abuse taint the image of charities in general. Unfortunately, there are cases of bodies claiming tax relief for non-charitable purposes, fraud or tax avoidance. A requirement for charities to submit annual accounts must be sensible and these should also be made available to the public.
Although I am aware of the practical objections raised on both sides of the House, I also urge the Chancellor to reconsider possible sanctions to discourage the accumulation of funds. Such accumulations may be perfectly proper, but there have been cases of idleness on the part

of trustees and there is always a potential danger in the practice which I have heard described as "money looking for trouble to happen".
It seems ludicrous that the Charity Commission, which has done such valuable work, has inadequate resources, both financially and professionally, to inspect annual accounts and to investigate possible wrongdoing. I am sure that my right hon. Friend would share my reluctance to advocate increased Government expenditure on this matter and perhaps much work, historically done without charge by the commission, could be contracted out, with better use being made of existing resources. The introduction of a modest registration fee, possibly renewable annually, would not be unreasonable. That would be in the interests of good administration and the production of revenue.
As the Inland Revenue has the power to disclose prima facie abuse to the commission, staff must obviously be redeployed to adjust to modern-day circumstances. Although a modernised Charity Commission might well pay for itself by preventing unjust fiscal claims, that argument would not in isolation carry weight with the Treasury.
Such enlightened Government measures would greatly increase the scope for co-operation between the public, private and voluntary sectors for the good of the population as a whole. I hope to play some small, but effective, part in furthering this end.

Mr. Giles Radice: The House will have enjoyed the speech of the hon. Member for Wimbledon (Dr. Goodson-Wickes) and the way he spoke about his predecessor who was a highly respected Member of the House. It will have enjoyed what he had to say about his constituency and it will also have noted the expertise with which he spoke about charities. No doubt we shall hear much from him in the future. However, there is just one issue which I wish to take up with him. Speaking as a Member for the north-east, I can assure him that there will not be another Tory Member of Parliament for Blaydon.
As we pointed out in the Treasury and Civil Service Committee report, the Budget judgments for this year will be made against a highly disturbed and turbulent international background. Indeed, they are the most turbulent since 1979–80, the years of the second oil shock. We can all agree that it is extremely difficult to predict the consequences of the sharp fall in the stock market in the last two weeks of October. For one thing, markets all over the world continue to be extremely unsettled, but we heard nothing about that from the Chancellor. We should have done.
Also, the response of the policy-makers in the main industrial economies has been extremely hesitant arid uncertain. The coming of the American presidential election has already had an impact on the United States, but it is not only the United States which has been slow to act. Other countries have also been adopting a highly cautious approach, particularly the West German Government, who seem to be very unclear about what action they should be taking. Yet West Germany has an obvious responsibility as a major trading nation, with a balance of payments surplus equivalent to 4 per cent. of its GNP.
The empty G7 statement just before Christmas was a sign of the confusion and uncertainty in the seven major industrial countries about what to do next. However, despite the difficulties about long-term predictions, the House should note that the latest report from the Organisation for Economic Co-operation and Development has already forecast that, as a consequence of the October crash, international economic activity will be significantly weakened. It also says that unemployment in OECD countries will begin to rise again.
The OECD report is particularly concerned about the impact on industrial and consumer confidence which could lead to a downturn in both investment and spending with the inevitable consequences for growth and employment — very much a classic Keynesian picture. Significantly, it warns policy-makers about the risk of a world recession. I should have thought that the Chancellor would at least have had the courtesy to mention that warning from a body of which the United Kingdom is a member. It is a risk which the Chancellor typically dismisses far too lightly.
With all the turbulence and uncertainty around, there might be a case for expressing some sympathy for the Chancellor as he prepares for the Budget if he were not so insufferably complacent, confident and cocky about the prospects for the British economy, and, more especially, about his own performance as Chancellor of the Exchequer.
It is true, and it is a good thing, that in 1987 our growth rate, at 4 per cent., has been faster than most of the rest of Europe. It is also welcome news that unemployment has been falling over the past 18 months, albeit assisted by changes in the way that the unemployed are registered. However, the forecast for growth in the Autumn Statement is only for 2·5 per cent. in 1988 and there are some signs that much of that growth will be bunched in the early part of the year. Lower growth, whatever the Autumn Statement says, is likely to mean higher unemployment. I note that the OECD report predicts that the pace of growth in the United Kingdom may not be sufficient
to prevent the rate of unemployment from rising again.
That is a very different message from the Chancellor's this afternoon.
The Chancellor's dilemma is that, if unemployment is to continue to fall significantly, and if regional differences are to be reduced, we shall need growth rates somewhat above 3 per cent. over the next three years. Yet the growing balance of payments and trade deficit is a factor that must make any Chancellor cautious about increased rates of expansion. That is a genuine dilemma that the Chancellor must face. Yet he makes these things far more difficult, not only for himself but for the British economy, by three aspects of his economic policy.
First, the Chancellor has made it clear that he is firmly committed to further income tax cuts in his Budget. Yet income tax cuts are, as all the models show, the least effective way in which to boost employment. They would almost certainly suck in more imports at a time when our balance of payments deficit is predicted to deteriorate.
Then there is the Government's posture on public spending and their highly cautious stance on the PSBR — more cautious in the Autumn Statement than was predicted. That stance means that infrastructure projects,

regional policies, and key social programmes such as health and education will all be deprived of necessary funds. The Chancellor forgets the important point that well-targeted public spending is a safer way, in terms of our balance of payments, bringing down unemployment and keeping growth going.
There is a third problem. As the Americans understand well, the obvious way to tackle a balance of payments deficit and to assist manufacturing is by devaluation. Indeed, the 1986 British devaluation provided substantial assistance to our economy. However, since then, the pound has increased in value by over 10 per cent. Yet the Chancellor's policy is to tie the pound firmly to the EMS, particularly to the deutschmark. In doing so, he clearly rules out any further devaluation in the near future. In that context, he should note the point made by the Prime Minister in an interview in the Financial Times in November, when she warned that gearing the pound to the deutschmark was likely to be deflationary. There is clearly a difference between the Prime Minister and the Chancellor on that point.

Mr. Quentin Davies: In his remarks, does the hon. Gentleman take any account of the extreme difficulty that we have had recently in preventing the pound from appreciating above three deutschmarks? How on earth can we contemplate pursuing a devaluation for parity at present, even if we wished to do so, without simply appalling monetary consequences?

Mr. Radice: That point has already been answered: we must bring interest rates down. Our interest rates, as the Chancellor pointed out to the Select Committee, are higher than most of those of our main competitors by two to three points and there is no reason why they should not be lower.
However, I draw some comfort from how much the Chancellor's policies have changed since 1979, which has been mentioned by several of my hon. Friends. After all, the Chancellor was the inventor of the medium-term financial strategy. However, monetary controls were virtually abandoned in October 1985. He used to castigate the Labour Government for their irresponsibility, yet over the past 18 months he has manufactured a good old consumer boom, fuelled by a remarkable drop in the savings ratio—I think from 7 per cent. to 5 per cent.—disguised fiscal relaxation and earnings rising faster than inflation.
It is not an Opposition invention to say that it is a good old consumer boom. The Chancellor himself told the Select Committee that the present rate of growth was unsustainable and above our historic levels. It was that for a good reason — the Chancellor was making his contribution to the Conservative party winning the general election.
Even on public spending, there has been a shift. First, hon. Members may remember that the objective was to reduce public expenditure in volume terms. Then it was to hold public spending constant in real terms. Now it is to reduce public spending as a proportion of GDP. Those are marginal changes, but they are changes in the right direction. There is also the famous change on the exchange rate policy. My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) noted that the Chancellor used to say that exchange rates should be left to the market, but he now believes in managed floating


and international intervention, although, as the right hon. Member for Worthing (Mr. Higgins) pointed out, he does not do that very effectively.
The former hard-line monetarist, the man who really invented the Government's strategy back in 1979, is becoming increasingly pragmatic. Like my right hon. and learned Friend, I welcome the Chancellor's conversion. I welcome his changes and over the next few weeks and months, and for however long he remains Chancellor—I understand that he wants to be Foreign Secretary—we all look forward to further changes in a more sensible direction.

Mr. Leon Brittan: My first and pleasant task is to congratulate my hon. Friend the Member for Wimbledon (Dr. Goodson-Wickes) on his maiden speech. He began with an elegant and apposite tribute to our former colleague, Lord Havers. I am sure that we would all wish to be associated with everything he said and, in particular, with the good wishes for his return to health. We were then given a conducted tour of Wimbledon which left even those of us who thought we knew the place infinitely better informed than we had been before. Finally, my hon. Friend made a perceptive and constructive speech about the relationship between the welfare state and the voluntary sector, and put forward a number of important suggestions which, I am sure, merit consideration. In all, if I may borrow a phrase from his constituency, he served an ace and we look forward to many more.
Looking at the Autumn Statement so long after its publication, we inevitably feel that it has a slightly antique flavour about it. But it is none the less remarkable for all that, because it is an account of strong but soundly based growth with the prospects for substantial further growth and falls in unemployment—and, by implication, more tax cuts. The decisions announced in it are, of course, the public spending ones arrived at after a period of intense haggling, which anyone who has been Chief Secretary looks back on with a mixture of nostalgia and relief that those days are over.
Although the hon. Member for Durham, North (Mr. Radice) seemed not to give sufficient weight to this fact in the earlier part of his remarks, the Autumn Statement shows an increase in spending for 1988–89 and 1989–90 of £2·6 billion and £5·6 billion respectively compared with the figures announced last year. The growth in Government expenditure in real terms, excluding privatisation proceeds, is expected to be 1·25 per cent. a year over four years
Those who might have anxieties about the implication of such an increase in public spending, after a period when the stated aim had been to hold expenditure roughly flat, are reassured in the Autumn Statement by the argument that public expenditure will at least continue to fall as a proportion of the nation's income over the next three years. When one takes into account the fact that, last year, the plans for this year were increased by £4·75 billion, the further increases in spending amount to significant relaxations in the public expenditure objectives of the Government.
Nevertheless, in the context of a rapidly expanding economy, my own view is that the Government's present proposals are still consistent with a generally sound financial posture. However, it is against that background

that we must consider the implications of the Autumn Statement and subsequent developments for future policy — in particular, for the forthcoming Budget. The Autumn Statement forecasts growth of 2·5 per cent. this year and £1 billion of PSBR for the current financial year, and assumes a similar PSBR for next year, although the actual PSBR is to be set in the Budget.
Looking forward rather than backward, the key question seems to me to be: have recent events at home or abroad, and possible developments in prospect, changed the situation in a way that should influence the Chancellor's judgment? I think they have. I agree wholeheartedly with the conclusion of the Governor of the Bank of England that the need for caution is now paramount. I add that caution makes good sense politically, too. We were, after all, re-elected only a few months ago and we have a whole Parliament in which to achieve our tax objectives.
We have always acted on the principle in the past that we would implement those objectives as and when we could afford to do so. I am sure that we would be wise to continue to follow that principle. By all means let us do what we can safely do this year, but in a year of international turbulence, the domestic consequences of which are still not clear, financial prudence should, above all else, be our watchword. Much can change in the next few weeks, but for the moment the objective of a negative PSBR would seem the right one to set.
This conclusion flows from considering both the world scene and the domestic economy. The international position needs to be examined first, because it is there that the uncertainties are greatest. What happens in the United States is crucial. There have been excruciatingly painful efforts in the United States to reduce the budget deficit, ending up with a cut at the lowest level needed to persuade the markets that the United States is even remotely serious about tackling its problems. Since then, some forecasts have emanated from the United States suggesting that spending will actually be greater than envisaged and that the cut in the deficit will be correspondingly low. It is clear that there is not the slightest intention of the increase in interest rates that is needed to go along with the cut in the budget deficit. It is not surprising that that should be so in an election year, but it is an important fact in the total equation.
Worst of all, in terms of confidence in the markets, is the continued insouciance shown by the United States administration, with the President, but a few days ago, saying that the trade deficit is a sign of the strength of the United States' economy.

Mr. Austin Mitchell: That is what the Minister said.

Mr. Brittan: It is not surprising that it has needed herculean efforts on the part of the world's central banks, at great cost, to keep the dollar even at its present level. Nor is it surprising that the financial community has considerable doubts about whether those efforts can be successful in anything other than the short term, in the absence of an appropriate policy to deal with the underlying problems.
When I was at the Treasury between 1981 and 1983 and we faced complaints about the high value of the pound, we always said that the exchange rate could not be altered by intervention on any permanent basis, and that all we could do was to smooth out short-term fluctuations.

Dr. John Reid: rose—

Mr. Brittan: I am inclined to believe that that is just as true today of current attempts to prop up the dollar. Although the dollar may have fallen far enough already, there inevitably remains a real risk of further irresistible pressure on it and a further fall in the United States stock market. There is no way in which we can insulate ourselves against that, so that is the first main reason for adopting a cautious fiscal stance.
I reject the idea that we should try to spend or borrow our way out of a recession that has not come and, if it did, would be extraneously induced. I suggest that the same cautious conclusion emerges from an examination of the United Kingdom economy. I do not accept that the fall in share prices has had a deflationary effect, or that it will have one, and that therefore we should now adopt a more expansionary policy than would otherwise be desirable. One might reasonably have expected that the fall in the stock market and the fear of further falls would have had that effect, but all the signs are that that has proved not to be the case. There are no signs of a significant lessening of economic activity; expansion is continuing at a rapid rate in all parts of the United Kingdom, including the assisted regions.
It is interesting to see the Lloyds bank economic bulletin, entitled "Limited Impact of Equity Slump", which contains a careful analysis of the so-called wealth effect and comes to the conclusion that it has proved to be extremely limited.
Another commentator makes the point that the exceptional growth in the second half of 1987 —annualised GDP growth of 5 to 7 per cent. — has a carry-over effect into 1988 so strong that, with no further growth at all, growth would be 2 per cent. in 1988 for that reason alone; with continuing growth, 3 per cent. to 3·5 per cent. is the probable total for the current year. Moreover, the stock market effect — if it had a deflationary effect—has already been counteracted by the 1·5 per cent. reduction in interest rates. There are already significant labour shortages in certain industries in parts of the country. That underlines the need for a vigorous regional policy — but that is a matter for another day. Looking at the whole picture, I believe that the domestic risk against which the Government must guard is not recession but the further build-up of inflationary pressures. For those reasons, domestic and international, I come out strongly on the side of those urging caution in the preparation of the Budget.
However, on the figures in the Autumn Statement, even with caution, there is likely to be some scope for tax reductions, and certainly opportunity for tax reform. Political momentum in favour of moving to 25p basic rate and reduction of top rates to 50p is now probably irresistible, but its timing must depend on what is consistent with a prudent PSBR target.
One way of enabling more money to be available for tax reductions than would otherwise be possible would be to restrict tax allowances to the basic rate. Indeed, there is a great deal to be said for also limiting mortgage interest relief and pension relief to the basic rate. If all that were done, £1·75 billion would become available for tax reductions.
Much of that money may be needed to deal with the problem of the tax treatment of married women, depending on precisely how that is done. However, I am

sure that the Chancellor appreciates that that is a structural problem, the resolution of which cannot be delayed any longer. The feeling of injustice about the present arrangements is now overwhelming. I for my part think that the Government's original proposals to deal with this had very much more to commend them than the critics have allowed.
Beyond that, and maybe beyond the forthcoming Budget, I would make the top priority the highest possible increase in personal allowances to take as many people as possible, at the lower end of the income scale, out of income tax altogether. That is desirable on two grounds. First, it is, of course, the people at the lower end of the scale for whom tax is now the greatest real burden.
Secondly, it is the obligation to pay tax on low incomes which is the main cause of the poverty trap and anything that can be done to make it more worth while to work than to stay on the dole is intensely desirable. Taking people on low earnings out of tax altogether means that employers can take on more people and further reduce unemployment, for the simple reason that the money that they can afford to pay will not be so reduced by tax that it is no longer higher than the dole.
If the main economic and social problem that we still face, particularly in certain parts of the country, is high unemployment, the top priority of fiscal policy must be to take people out of tax and stimulate employment in that way, provided always that that can be done in the confines of a reasonable fiscal policy.
To allow inflation to start up again would do no service to the economy, no service to the unemployed, no service to the Government, no service to the Conservative party, and no service to the country.

Mr. Peter Shore: I should like to add my voice to the tributes that have been paid to the hon. Member for Wimbledon (Dr. Goodson-Wickes) for his successful maiden speech. The House was pleased with what he said about his predecessor, who was a most popular Member. Those who know his constituency of Wimbledon will share his sentiments entirely. We enjoyed his contribution and look forward to hearing from him again.
I join my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) in feeling considerable disappointment at the Chancellor's speech, which opened the debate. It was a mistake for the Chancellor to have left the entire subject matter of the Autumn Statement to the Chief Secretary who is to reply, rather than essaying himself an analysis, defence and general setting-in-context of the Autumn Statement for which, after all, he has the prime responsibility.
I listened, of course, to what the Chancellor said about the international economic scene. I accept that there are great difficulties in reaching any certain judgments about the likely course of events. However, I agree with the hon. Member for Horsham (Sir P. Hordern) and with my right hon. Friend the Member for Blaenau Gwent (Mr. Foot), because I do not see much sense or profit being gained from publicly upbraiding America for the alleged failure of its economic policy when the United States has been the principal engine of world economic growth for several years. Any significant reduction in the American deficit should, at least, be accompanied by corresponding increases in the growth activity of the great surplus nations


of Japan and West Germany. If we were seriously to urge on the Americans dramatic movements in cutting their trade deficit and their budget deficit without corresponding and compensatory movements towards expansion by the other major industrial countries of the western world, we should have a recipe for a major slump and recession, which would not be confined to the western world but would, of course, embrace Third world countries, which have appalling suffering.
I am sorry that the Chancellor could not remain in the Chamber until he had heard the end of my speech. Nevertheless, I am glad that the Financial Secretary to the Treasury has heard what I have said and I hope that my sentiments will be conveyed to the Chancellor.
There are two or three crucial and indisputable facts about our present economic and social situation. The first is clearly stated in the Autumn Statement. The growth in GDP that we have enjoyed during the past year is forecast to slow down considerably in the year ahead. That does not conflict with the forecasts of the Organisation for Economic Co-operation and Development and others. The forecast of a falling-away of growth applies not only to Britain, but to virtually all the other countries in the western world and it is one principal source of our concern. It is clear that unless something else happens, growth will slow down. That will mean an end to the gradual reduction in unemployment and it is perfectly possible that there could be a reversal of the current trend. That is fact number one.
Fact number two is that the Autumn Statement forecasts—correctly, I am sure—the elimination of the public sector borrowing requirement. It is true that it will be the first time since 1970 that we have moved into surplus on the budget account. That is a remarkable change. However, the way in which that has come about might merit considerable discussion in the House.
My explanation of what has happened is that during the past 18 months there has been a significant increase in Government public expenditure, which has been only partially disguised by the sale of public assets. At the same time, there has been an obvious and notable decrease in taxation and a considerable fall in the exchange rate, especially in the earlier months. Surprise, surprise—the economy expands when one cuts taxation, increases public expenditure and lowers the exchange rate. Of course that is what happens, but for the past eight years the Treasury Bench has failed to understand that when one achieves expansion, one gets buoyancy in revenue, which means that the money that one thought that one had borrowed is more than covered by receipts from the increased economic activity. That is what the entire Keynesian argument is about. There are certainly criticisms of it and, although there are lessons to be learnt, it should not be carried too far. However, it is much more rewarding than the awful arid doctrines of monetarism which simply squeeze the life out of the economy while hoping that somehow spontaneous regeneration will occur. The elimination of the PSBR is, thus, the second point.
The third fact, which I think has impinged itself on all hon. Members and, indeed, on everyone in the country, is that two of our social services are going through a period of obvious crisis. The National Health Service has been referred to by many speakers, not only in this debate but virtually from the time the House resumed after the recess. I will say nothing more about it except that I agree entirely with the right hon. Member for Worthing (Mr. Higgins),

the Chairman of the Treasury and Civil Service Select Committee, who pointed out that the growth rate in real terms is at most 1·2 per cent. That will not be adequate for the needs of the Health Service, where a massive injection of funds on the scale mentioned by the former Leader of the House, the right hon. Member for Shropshire, North (Mr. Biffen), is almost certainly required.
Another social service of great importance to our people is rented housing, where we are talking not about the inadequacy of growth but of devastation and destruction that has not been compensated by any new building in the private sector. There has not been an increase in overall housebuilding in Britain. This is the eighth year in which the total has fallen well below the level in every year during the 1970s.

Mr. Winnick: I am grateful to my right hon. Friend for giving way. Is he aware that just before the Christmas recess, I received a reply from a junior environment Minister saying that as far as the Government were concerned it was no longer the function of local authorities to build. Bearing in mind the thousands of people on waiting lists throughout the country, and the scandal of bed-and-breakfast and hostel accommodation, is it not absolutely disgraceful that for the first time in 60 to 100 years local authorities have been told that they no longer need to build?

Mr. Shore: It is the logic of the situation that local authorities can no longer be responsible if they are denied the resources. Let us look at the figures. The figures produced in the Autumn Statement on public spending are for expenditure on housing of £3,020 million. In the same 1988 cash value terms, we were spending more than £7,500 million in 1978–79. That is a fall in the housing programme of 60 per cent.

Mr. Roger Knapman: rose—

Mr. Shore: I shall not give way to the hon. Gentleman at the moment.
It will surprise no one to learn that both completion and new starts in public sector rented housing in the past year have been 30,000, whereas in 1978 starts were 107,000 and completions were 130,000. If anyone wants to know why we have an army of homeless and such discontent on oar estates, there is the reason. There has been total neglect of housing provision and an obsession with housing ownership.
I have put together three facts which are pretty much incontrovertible. The first fact is that we shall have a slowdown in growth over the next year. Secondly, we have no PSBR deficit; indeed, we have a surplus for the first time in 17 years. Thirdly, we have two obvious crises in two essential public social services which cater for the needs of our people. Surely there has never been a better opportunity for the Chancellor to act, for once, clearly and responsibly in the interests of the British people If the Chancellor felt when he presented the Autumn Statement last year that a PSBR of 1 per cent. of gross domestic product, a mere £4 billion, was prudent to the point of great praise for himself, why should not a similar PSBR in the coming year be equally prudent? Would not that mean that resources of the order of £6 billion would become available?
As many right hon. and hon. Members have said, it would be folly if such resources were flung into consumer


purchasing power. Some contribution could be made there, but to dispense large sums of money to private consumers, knowing perfectly well that that would fuel an expenditure explosion or an increase in imports, would be folly. However, there would be no folly at all in spending more money on the Health Service and on the building and construction industries, both of which have a very low import content. Such expenditure would also give enormous help to many people who are in desperate need of adequate health care and decent accommodation.
I must say to the Chief Secretary to the Treasury that there cannot have been many such opportunities where circumstances have been so united for doing good things. They are now in the hands of the Treasury, and we hope that they will be exploited in the Budget of 1988.

Mr. Bowen Wells: One of my first observations in my brief remarks concerns what right hon. and hon. Members on both sides of the House have been saying about the way in which we could distribute the additional money that the economy is earning. My right hon. Friend the Chancellor and his team have managed to expand our economy so that there is money available for the Health Service and indeed the social services and housing, about which the right hon. Member for Bethnal Green and Stepney (Mr. Shore) has spoken.

Mr. Knapman: Will my hon. Friend bear in mind the remarks of the right hon. Member for Bethnal Green and Stepney (Mr. Shore), who referred to homelessness? Would it not help the plight of the homeless if certain Labour councils with 10 per cent. of their council houses empty got round to letting those houses?

Mr. Wells: That is a very good point, but I was congratulating my right hon. Friend the Chancellor on the way in which he has conducted the economy so that we have surpluses available to spend in this way. Indeed, it is a great credit to him that this wonderful situation has been brought about by careful and sensible financial policies.
I want to help the Chancellor in relation to the international scene. He opened the debate on that subject. It is in the international setting, as the right hon. Member for Blaenau Gwent (Mr. Foot) said, where, if we get it wrong and the United States economy goes wrong, we shall not be able to resist the forces of depression in this country if the economies of the world contract.
The issue causing me to detain the House this evening is my concern at the serious lack of analysis of the international financial situation that was displayed particularly by the shadow Chancellor of the Exchequer, the right hon. and learned Member for Monklands, East (Mr. Smith), on the occasion of the stock market crash and the subsequent Opposition Supply Day debate.
I thought that the right hon. and learned Gentleman conducted the debate in a frivolous manner that was most unhelpful in seeing a solution to the serious domestic and international difficulties that we faced at that time. On that occasion speaker after eminent speaker claimed that the financial markets would not stabilise until after the United States budget deficit had been reduced substantially. Indeed, my hon. Friend the Member for Horsham (Sir P. Hordern) made this point delicately—as the right hon.

Member for Blaenau Gwent said in his speech—to the Chancellor this evening in taking issue with him on his Mansion House speech.
Once such an event as the stock market crash has occurred, we were assured that the dollar exchange rate would stabilise and the stock market would recover. Undoubtedly, the United States budget deficit has been a cause of imbalance in the international financial markets for some time, but in the years that it has been growing, it has caused stock markets to rise to unprecedented heights in this country and indeed in the United States. The value of the dollar has risen simultaneously and the deficit has been the principal reason that the world economy began to grow from 1981 onwards. I agree with the right hon. Member for Blaenau Gwent, who 1 am sorry is not in his seat, that the failure of the United States Government to expand the economy at that point would have led to a drastic world-wide recession.
Perverse as the phenomenon may be, this is what happened during the period 1981–87. It has two other significant effects. It was a major cause of the rising United States trade imbalance because its value was rising instead of falling, as a budget deficit would conventionally have suggested it should do, and which most economic commentators would say was inevitable. This has led to very serious calls for protectionism from beleaguered American manufacturers faced with a huge amount of competitive foreign goods on their domestic, let alone international, markets and their inability to compete with both in domestic and overseas markets.
The other effect of the United States deficit is to suck in foreign domestic savings to finance the budget deficit, and to create historically high real interest rates. The high interest rate regimes run in this country are a reflection of the United States policy, which has undoubtedly inhibited investment in our domestic economy. This in turn has led to the persistence of unemployment in Britain and Europe and has had a devastatingly contracting effect on the trading partners of Britain and Europe and the economies of the Third world trading nations because of the falling demand in Europe and Britain and falling commodity prices.
If the United States budget deficit had this effect in 1987, how can it be argued that simply by reducing the United States deficit we will gain market stability, exchange rate stability and continuation of growth? Undoubtedly, if the United States had responded to the calls for a drastic cut in the budget deficit, growth in the United States would have slowed dramatically, throwing the United States economy into recession. Such a situation would have made it very difficult to export to the United States, and slump would have hit the United States' trading partners, Japan, Britain and western Europe. Such a scenario would have been disastrous for the international economy.
If we look at the current condition of the world economy, we cannot be self-satisfied. Europe still has major unemployment and serious under-utilisation of productive capacity. The markets of the United States with Latin America and Europe's African markets are closed down because of their chronic indebtedness. No expansion of exports from Europe or the United States can take place there. Only the markets of the far east are open to world trade, where fierce competition between Japan, the United States, Britain and western Europe takes place, much of it resulting in trade on a very marginal, if not a minus,


base. If, on top of this, we close down trade between the United States, Japan and western Europe by putting the United States into recession, we shall certainly face a worldwide slump.
It is widely argued that the way out of these difficulties is to enable the world economy to expand without overheating into inflation. How is this to be done? It will not happen automatically; it must be managed. As Paul Volcker rightly said, money will not manage itself, and certainly international money will not. It is equally certain that if one does not manage money, others will manage it for one. I agree with Lord Lever who, in an article in the United States publication "The International Economy", says:
Yo-yo currencies are fundamentally incompatible with a liberal and prosperous, interdependent global economy. The most important condition for a return to greater world progress and trade expansion is the establishment of a system of collective disciplines for the management of the exchange rates of the world's major currencies and especially that of the dollar.
I support wholeheartedly the Chancellor's efforts to coordinate policies in the world and, in particular, the measures that he outlined in his speech this afternoon. One thing that he left out of his analysis, however, was the issue of debt, yet my right hon. Friend is the most innovative Chancellor and the most imaginative Finance Minister on the world stage at present in putting forward his suggestion of how African indebtedness should be dealt with.
He has suggested that the world's indebtedness may be dealt with, especially as regards Africa, where there is very little hope of repayment, by converting present public indebtedness—that is, Government loans—to grants, by reducing interest rates and by extending the indebtedness of those countries so that repayment can take place over a much longer period, with the repayment being related to the economic capacity of a country to earn its living and service its debt.
My right hon. Friend has met with little encouragement from trading partners such as West Germany and the United States, but he should persist in his attempts to persuade both the United States in relation to the Latin American debt, and West Germany and Japan in relation to other indebtedness, to enable that reorganisation of the indebtedness of Third world countries so that trading can be resumed, markets can be opened up in those countries and we can thereby begin a world expansion in trade which will result in the reduction of unemployment in our own economies and the beginning of the expansion once more of the very impoverished nations of the world on which we impact. Unless we also look at that debt issue and get it put right, we will not see the world expansion in trade that we all desperately need.
It is by the combination of policies, the co-ordination of policies and the management of policies that we shall expand world trade, prevent recession and prevent the recurrence of inflation, which is an undoubted scourge on all our economies.
There are certain points which need, therefore, to be addressed in trying to achieve that co-ordination of policies that will benefit us all. First, there must be expansion of the German and Japanese economies, and trade with all countries. Their economies must permit imports from those of us who are able to supply them, and so there must be a dramatic reduction in tariff barriers, and a GATT round, designed for that purpose, must be

hurried up and made effective. There must be a controlled reduction of the United States deficit, and of our interest rates here in Europe and in the United States to encourage investment; a stabilisation of currency relationships; and massive debt rescheduling to permit trade with the underdeveloped economies of the world.
We must support the international organisations in their attempts to make certain that there are proper economic policies, designed to produce wealth-creating activity in Third world countries—and that must be a condition of any rescheduling in which we might indulge. Those international organisations—the World Bank and the International Monetary Fund — should be strengthened to provide the money for that expansion and the disciplines necessary for those Third world economies to prevent them going once more into chronic indebtedness.
We must also reduce agricultural subsidy in the developed world so as to increase the possibility of trade with the Third world countries which mainly trade in agricultural commodities and which are unable to do so because of agricultural subsidy regimes.
Given those conditions, and working together, we shall see an expansion of world trade and so an increase in commodity prices, with the result that the whole world trading system will benefit and we shall be able to get an expanded economy, able to afford health services and social services without indulging in overspending in the public sector.

Dr. John Reid: I begin by adding my congratulations to the others given to the hon. Member for Wimbledon (Dr. Goodson-Wickes) on his maiden speech. I cannot say that I agree with everything he said, but I found it a generous contribution. It was concise and comprehensive and in many parts extremely interesting. In short, it was riot the Chancellor's speech.
The Chancellor's speech was a rather bizarre contribution, managing to open a debate on the Autumn Statement while making no reference to large and important sections of that statement, including, for instance, public expenditure. I do not blame the Chancellor for staying as far away as possible from the Autumn Statement because the only way I can sum it up is that it is a sort of plethora of platitudes. Unfortunately, he could not distance himself too far from it because of the striking similarity between that plethora of platitudes on 3 November and the cartload of cliches today.
We heard an updated version of the Chancellor's familiar theme of the Government's first four years. In effect, he said, "We are turning the corner." Indeed one of his hon. Friends could not resist throwing in a reference to Noel Coward's telling us that good times were just around the corner. When we heard that in the first four years of this Government, we knew in our hearts that it bore little relation to reality. The same is true of the Chancellor's statement. He boasts of prosperity to my constituents, who see around them nothing but increased poverty. He sings of industrial success when people in my constituency and in Lanarkshire experience little but industrial decline. He bleats about steady growth to those in Britain who have seen nothing but steady decline in the standards of public services over the past few years.
The truth does not lie in the statement that the Chancellor made today. The truth about the economy is


simple: far from experiencing an economic miracle, we have an economy which is still growing more slowly than it did under the much reviled Labour Government whom the Chancellor likes to attack when under fire. Manufacturing output has only just returned to its 1979 level and manufacturing investment is still almost 10 per cent. lower than it was in 1979 when the Government came to power. Our manufacturing trade deficit is at an all-time record and our balance of payments has been deteriorating rapidly. As if this year's news were not bad enough, the Autumn Statement makes it plain that there is worse news for next year. On the Government's own calculations, the Treasury expects slower growth, higher inflation and a worse balance of payments this year than we had last year—all of this in spite of the fact that the Government have had the benefit of £60 billion of oil revenues.
How, then, can the Chancellor continue to boast of economic and industrial success? I do not believe that it is just because the Chancellor is a stupid man, although from time to time it strikes me that if he left his brain for scientific purposes the scientific community of Britain would contest the will. It is not just because he is an obstinate man — although, God knows, he is that as well. It is not merely that he is apparently ignorant of the social consequences of his policies. The fact is that the Chancellor has managed to combine all three characteristics—stupidity, ignorance and obstinacy—in a manner almost unparalleled since Marie Antoinette. It is almost unbelievable that, with a windfall of that magnitude, this Chancellor should have created such a manufacturing deficit—not for the first time in 30 years, but for the first time in Britain's industrial history.
It is because of the combination of the Chancellor's blindness to the consequences of his policies and his failure to realise the suffering that they have caused that he can boast about his fiscal policy, among other things. The Government's fiscal policy has been marked by two characteristics. First, it has been socially divisive and, secondly, it has increasingly diverted the burden of taxation away from those best able to afford it on the backs of those least able to afford it.
The Chancellor may not have departmental responsibility for the poll tax, but it is the child of his philosophy because it meets the two criteria that I have outlined. Not only is that tax grossly unfair, highly inefficient and thoroughly regressive, but its effects on millions of people in Scotland have been intentionally underestimated in Government propaganda. The truth is that the poll tax will not remain at the £250 per head that the Government have suggested. According to figures produced by the Library, assuming that the new business rate will be held steady in real terms—the Government tell us that it will—and that the cuts made in central funding to the local authorities over the past five years will continue, at 1986 prices the poll tax will be running at £450 a head in real terms in a very short time. That is one further act whose genesis lies in the fiscal policies based on the Chancellor's philosophy.
I refer briefly to the Chancellor's public policies. If he does not believe that there is a crisis in the National Health Service, let him speak to nurses and ancillary workers at Hartwood hospital. I understand that through the howls of disbelief at her statements on the National Health Service, the Prime Minister today challenged hon.

Members with constituents who are nurses or ancillary workers who are holding a token strike to condemn that action. I shall respond to the Prime Minister's challenge. It is the height of hypocrisy for Margaret Thatcher of all Prime Ministers to ask us to condemn people who have committed their lives to the Health Service, who pursue a profession that has had a tradition of non-militancy for 100 years but who have been pushed to action that they regard as extreme for the sole purpose of safeguarding patient care.
On 15 March—the ides of March—the Chancellor will have the chance to prove that the Government really care for the National Health Service. If he does not take that opportunity to use part of the supposed £3 billion surplus to meet the inadequacies of the Health Service, we shall have a historic repetition of the events of the ides of March. "Et tu, Nigel?" may not have the same classical ring as "Et tu, Brute?" but there will be some classical justification for it if another supposed friend of the National Health Service sticks another dagger into its heart.

Mr. David Howell: The world economy has been passing through an extremely dangerous phase, and continues to do so. Unlike the hon. Member for Motherwell, North (Dr. Reid), I feel that we owe my right hon. Friend the Chancellor a vote of confidence for the skill with which he has so far steered us through these dangerous and challenging rapids. His troubles are certainly not over yet, as I shall explain in a moment. Now that Paul Volcker has departed from the scene, my right hon. Friend's judgment will become increasingly central in world financial circles. He will be turned to increasingly and that will be a heavy responsibility, which I believe he will carry with skill and experience.
I said that my right hon. Friend's troubles were not yet over, because the worst is yet to come. In the 1930s, following the financial crash, many said, "That is just financial. We can all relax. The economy is fundamentally sound." Our position today is not dissimilar and the same pattern could unfold if we are not careful. The reason has less to do with our own affairs than with the fact that the United States economy is in an extremely fragile, indeed rotten, state. Despite the superficial signs of prosperity—job performance and the increasing exports to which my right hon. Friend referred—that economy is riddled through with debt of every kind.
Tomorrow's trade figures may be a little better. They will merely confirm what is obvious to some of us, although not to some Opposition Members: one cannot devalue one's way to salvation in trade any more than one can do so in any other activity. The trade figures will probably not be appalling, but they will not be very good.
Tomorrow's trade figures will tell us nothing. The United States economy is burdened not only with the debts of the developing countries about which my hon. Friend the Member for Hertford and Stortford (Mr. Wells) spoke so eloquently but, more seriously, with a mass of farm debts, energy bad debts, over-borrowing by consumers on a scale far greater even than in this country and, above all, a mass of bad debt arising from the huge speculative borrowing that went on throughout spring and summer last year to finance junk bond arrangements and leverage-managed buy-outs. The present situation is the legacy of that period, which some hon. Members seem to think was


a good period for United States economic policy. The true legacy consists of borrowing and debt on a most fearsome scale, which are bound to mean that the American economy remains deeply sick.
All this will mean that the recession, which will come anyway, will be prolonged. I differ from my right hon. Friend the Chancellor only in that respect. Of course, he is right to suggest that this economy is in a strong position in a dangerous world. However, he is too sanguine about the prospects of recession arising from what is coming quite soon in the America economy. As happened in the 1930s—the present situation is not dissimilar—we have a mass of bad debt that will never be repaid and that will lead banks increasingly to seek loans of higher quality and to try to squeeze out those stuck with unrepayable loans.
Neither the clichéd traditional policies of Keynesianism recommended by the right hon. Member for Bethnal Green and Stepney (Mr. Shore) nor monetary policy have much power to exert a counteractive influence. There often comes a stage—this was very much so in the early 1930s—when a monetary policy that has been relevant during several stages of the cycle ceases to be an effective instrument. Keynes described it as like pushing on a piece of string, trying to counteract the recessionary forces of a debt-ridden world — particularly a debt-ridden United States economy — by monetary expansion and an injection of additional money and liquidity.
That is the reality, and those who think that we are over the financial crisis and that there will be a calm phase when everything will gradually pull together are living in cloud cuckoo land. The dangers are as great as ever, if not more so. Our task in our part of the global economy is to do everything responsibly and to manage our small ship in the colossal storms that are all around us and are still coming over the horizon.
The first thing that we must do—we have already done some things that were necessary—is recognise the limitations of our position and avoid following the Americans into debt-ridden disaster. We must avoid accumulating more debts. Luckily, we are in a stronger position than the Americans were in the 1930s, just as the Americans are in a much weaker position. In the 1930s, the United States was a creditor country, but now it is one of the world's biggest debtor countries. We had some credits in the I930s, but they were dying away. Today we are a strong, major creditor nation.
We must do everything possible to preserve that, internally and externally, and to maintain a creditor position. That means avoiding debt in terms of the Autumn Statement and the issues immediately ahead for the Budget, and it means that we must pursue a policy of a tight Budget. By a tight Budget I mean a balanced one, I understand from the excellent report of my right hon. Friend the Member for Worthing (Mr. Higgins) and his colleagues that when the Chancellor speaks of a balanced Budget he means a borrowing requirement of about 1 per cent. of GDP. That is probably sensible — a little borrowing covering some but not all of Government capital spending and revenues covering certainly all current spending.
If the Chancellor follows that policy with a tight and balanced Budget consistent with the picture that I have painted of an extremely dangerous world, it could make room for £3 billion or £4 billion-worth of tax cuts or increased expenditure. We have heard different views on which it should be, but I believe that tax cuts produce

increased revenue. Cutting taxes has produced a vast increase in revenue from VAT, corporate taxation and income tax. Out of that can and should come the additional resources that should be spread to the vulnerable parts of the economy and to the major public and social services that we need.
If Opposition Members think that there is a policy choice — that we can have either tax cuts or public expenditure increases—they are living in a world of muddle. Tax cuts will generate the wealth that will enable us decently to finance vital public services and raise family living standards through individual effort.

Dr. John Marek: Will the right hon. Gentleman give way?

Mr. Howell: No, there is not time.
In the Chancellor's own words, there is room for substantial tax cuts within the balanced budget strategy.
Should we go for higher interest rates? I cannot understand that view. Every time that interest rates go up, they add to the money supply and liquidity and increase the inflation risk, not reduce it. To increase rates would go against the strategy of G7, to which we are committed.
My right hon. Friend the Member for Richmond, Yorks (Mr. Brittan) said that he agreed with the comments of the Governor of the Bank of England. I do not agree with them, and I did not understand the reference to the need to raise interest rates. That would be wrong and inconsistent with the earlier point that I made about maintaining a tight position in this country. Raising interest rates is an absurd response to the need to maintain the position, avoid debt and tighten credit.
The more realistic policy that my right hon. Friend may have to face is to return to more direct controls over consumer credit, the various ways in which plastic money is dished out and the way in which some credit companies freely provide credit to completely uncreditworthy people without bothering to find out how much they have already borrowed. He may have to consider, dare I say, direct hire purchase controls, which is an old instrument of the past. If we are concerned about avoiding consumer debt, that is where we must press the button. The idea that raising base rates will do anything to improve matters has been disproved; on the contrary, it would be counterproductive.
That is the message that I want to add to the interesting points that my hon. Friends have made. We must avoid debt and keep a tight ship. This is the very last moment when one should crowd on sail in the middle of a storm — that would be absurd. There are enormous squalls ahead and we must be extremely cautious. The vast inflation of assets and house prices led to the crash in October and it could lead to another. Inevitably and unavoidably, now will come the recession. That is now much the greater danger than price inflation, although we may get both at the same time. Price inflation will remain subdued because commodity prices will not rise—they will fall. Oil prices will fall and that will create a climate internationally of disinflation.
What we must be prepared for is recession. My right hon. Friend has helped to prepare us with great skill in moving through all these shoals and difficulties, but there is more to come and much more skill will continue to be needed if we are to get through without great hurt.

Ms. Joyce Quin: I welcome the opportunity to speak in the debate, particularly as I am a member of the Treasury and Civil Service Select Committee that has considered the Autumn Statement and through it the state of the British economy.
Like my hon. Friends, I feel that the position is not quite as the Chancellor depicted it this afternoon. There are large sectors of weakness in our economy and in the Chancellor's strategy for dealing with it that have been glossed over.
One of our main concerns, if not the main concern, must be unemployment. I welcome any fall in unemployment, but even on the Government's figures it is still well over 2·5 million. I fail to understand how there can be general rejoicing among Conservative Members about the state of the economy when that level of unemployment persists. Rejoicing can begin only when unemployment drops below the level that it was when the Government took office in 1979.
In his evidence to the Select Committee, the Chancellor was less than clear about the future level of unemployment. He was not sure whether it would go up or down or stay the same, and he seemed to adopt a nonchalant attitude to questions.
Unemployment should be the centre of any economic strategy. I share the worries that many of my hon. Friends have stressed about the balance of payments, particularly about the value of manufactured goods and the increasing demand for imports. Allied to that is the fear that some have expressed, that many imports are bought on credit. As a part of the tremendous growth of consumer credit, that has virtually doubled since 1980. Perhaps even more worrying is the fact that the claims of moneylenders in court to recover loans has increased since 1980 by 180 per cent., which makes the credit problem clear.
As we look ahead to the Budget and the possible taxation changes, it is important to stress our commitment to zero rating on VAT. During Treasury questions today, the Government seemed to reiterate their commitment to continue with the zero rate on food, children's clothing and fuel, but we have still not had a firm commitment, despite repeated questioning during Question Time and in the Treasury Select Committee, to a continued zero rate on books, newspapers and periodicals. Perhaps in his reply the Chief Secretary will give such a commitment from the Government. I certainly hope so.
My hon. Friend the Member for Motherwell, North (Dr. Reid) talked about the unfairness of much of the tax burden, and I echo what he said. The tax burden is distributed unfairly. I hope that the Government have studied the Government publication "Social Trends", which shows clearly that under this Government inequalities in society and disparities in incomes have greatly widened. I hope that the Chancellor will take those figures on board when looking at future tax reform. Many tax perks and concessions are given unfairly to those who are already well off.
One case which the Chancellor could pledge to do something about concerns tax perks and concessions for private investors in forestry. I understand that those concessions amount to about £10 million a year. That may not seem a great amount, but £10 million could build about three new hospitals. It could certainly extend the attendance allowance to children under the age of two, as

suggested in the amendment to the social services legislation put forward yesterday, which would cost only £7 million. It is unjust to give tax perks and concessions of that type.
A great deal of unfavourable publicity has been given to generous tax concessions to well-known television chat show hosts and snooker players, who have created vast tracts of unattractive conifer plantations which, in the absence of planning controls, are disfiguring some of our most beautiful landscapes and national parks. The Northumberland national park is having its character changed daily by geometric slabs of monochrome conifers. The Chancellor could do his bit for nature conservation and at the same time get back some money for a more useful purpose by ending those concessions.
The concessions mean that, to meet the real cost of £400 per acre for conifers, the tax investor needs to fork out only £120. By careful switching from schedule A to schedule B tax, the tax concessions become even more generous. This form of forestry is uneconomic without such concessions; I would ask the Government to affirm that. The Government are paying ten times more to subsidise forestry than to subsidise sheep farming on the same land. I hope that the Government will take this on board and give a commitment to us in the reply.
The initial points I made are more fundamental, particularly on unemployment. It would be good to have a comprehensive strategy for tackling that subject tonight, although precedent suggests that this is very much in doubt.

Mr. John Townend: The Autumn Statement is a vindication of the Government's economic policies since 1979. My right hon. Friend the Chancellor and his predecessor deserve the country's gratitude for the way they have managed our economy. We have had almost seven years of sustained growth. This year manufacturing output will rise by 5 per cent., which is one of the highest rises in the industrial world.
Despite what the hon. Member for Gateshead, East (Ms. Quin) has said, unemployment has dropped by 500,000 and is falling rapidly. In the Bridlington and Driffield travel-to-work area in the north of England unemployment has fallen by 2 per cent. in the past year and is now only 1 per cent. above the national average. At the same time, industrial productivity and profitability have grown fast. This has all been achieved at a time when inflation has been progressively brought down.
The Chancellor now has a real chance to create a virtuous economic circle. More growth creates higher profits and wages, which boost Government revenue. At Budget time the Chancellor will be in an enviable position enjoyed by very few previous Chancellors. He will be able to increase spending on health and education, as has been announced in the statement, to reduce Government borrowing and taxation, and have a virtual balanced Budget for the first time in many years. That will stimulate non-inflationary growth even further.
As a result of the undoubted strength of our economy, we are well placed to cope with the stock market crash which has taken place in most of the world's stock markets, and with the resulting world depression that is being forecast by many people, including many hon. Members, and most of our competitors. There is no doubt that if there is a world recession we will be affected. Two


aspects of the economy must be watched carefully. The first is the competitive position of industry, which is likely to be adversely affected by the recent strengthening of sterling. We should be reluctant to increase interest rates further, as that would push the value of the pound even higher. I suggest that at Budget time there is a good case—I agree with my right hon. Friend the Member for Guildford (Mr. Howell) —for tightening the fiscal stance and allowing interest rates to fall and sterling to stabilise at a slightly lower level.
It would he damaging to our competitive position if unit labour costs rose faster than those of our industrial competitors. For several years, wages have risen significantly faster than inflation, but unit labour costs have been kept down by a massive increase in productivity. The rate of increase, which by historical standards has been large, is unlikely to be sustainable over many years. Recent increases of wages by 7 to 8 per cent. are worrying. Despite the pressure from many sources, the public sector, as the largest employer in the land, has a responsibility to set an example in keeping wage increases under control in 1988.
I have some apprehension about the level of public spending. Since 1979 the Government's policy on public spending has been progesssively watered down. The Treasury Select Committee, on which I am privileged to serve, has drawn attention in previous reports to the policy changes, and that is repeated in paragraphs 13 and 14 of the report on the Autumn Statement. I was one of those who strongly supported the 1979 policy of reducing spending in real terms. I was unhappy that this was not achieved and that spending rose by 2·25 per cent. in real terms between 1978–79 and 1982–83. The Government then faced the facts and changed their objective to holding public spending broadly level in real terms, but regretfully they failed to achieve that objective.
The policy now is to let spending rise in real terms it rose by 1·75 per cent. from 1982–83 to 1986–87—so long as it falls as a percentage of GDP. I was perturbed when the Chancellor informed the Committee at one of its recent meetings that in a recession the Government might let spending rise as a percentage of GDP in any particular year. Government spending, excluding the proceeds of privatisation, which is planned to be 42 per cent. of GDP in 1988–89, is far too high. We should have a target to get that figure down to under 40 per cent.
Without doubt the taxation rate on individuals is still too high. Our top rate of 60 per cent. is far too high when compared with our major industrial competitors. The bottom rate of 27 per cent., on to which is added 9 per cent. national health insurance contribution, making a total starting rate of 36 per cent., is also far too high.

Dr. Marek: The hon. Gentleman must get his facts right. Our top rate is not all that high. Only the United States and possibly one other country have a top rate lower than ours.

Mr. Townend: If the hon. Gentleman examines the facts, he will find that in many other countries the top rate starts at a much higher level of income.
Despite the excellent efforts by the Treasury in particular and the Government in general, expenditure in some areas is not very well controlled. The DHSS budget is spending £69 billion a year. I asked in a written question what was the cost to the United Kingdom taxpayer of

DHSS payments to citizens of the Irish Republic. I received the reply that the Department did not know, as no separate records are kept. I thought that that might be understandable; perhaps all non-United Kingdom citizens were lumped together under one heading. Accordingly, I put down another question asking the total cost to the Exchequer of DHSS payments to non-United Kingdom citizens. I received the same reply—the Department had not the slightest idea.
I am sure that we are not receiving value for money in many parts of the Health Service. We have been pouring in billions of pounds of extra money every year, yet the demand for more resources by those with vested interests is rising like a crescendo. I find it strange that we have far more nurses per hospital bed occupied than have, for instance, Germany and France.
Such massive consumer resources should be split up. They are far too large for any single Cabinet Minister to oversee. There should be separate Cabinet Ministers for health and for social security. If we do not want an extra Cabinet Minister, social security should be tacked on to employment. That would be far more logical.
Let me say a brief word about the world scene. If the United States must solve its dual problems of the trade and the federal deficits, it will inevitably cease for a period to be the engine of the world economy. If we are to avoid a world recession, other countries will have to take its place.
The United Kingdom, with its growth rate in the past year, has certainly played its part—especially in view of its balance of payments deficit, which Opposition Members have pointed out. The world, however, must look to the two major surplus countries to play their part if we are to avoid recession. They, of course, are Germany and Japan. Although both countries make gestures by stimulating their economies, they have not done enough to keep world trade growing at the required rate. In particular, Japan's actions to open up its home markets 1:0 imports have been pitiful. Japan needs to be pressurised more effectively and, indeed, threatened with retaliation by all members of the G7 group.
It is interesting that our Foreign Secretary said on returning from Japan that he was hopeful that the discrimination against Scotch whisky would end — not now, but within a year. It is always the same with the Japanese: they will do it, but not now. It is not convenient; it is not politically possible; it is in the future. It is always the same old story.
I support the remarks of my right hon. Friend the Member for Worthing (Mr. Higgins) about intervention. It is very dangerous for us to intervene to keep up the value of the dollar when the United States is not putting its own money at risk. Table 4 on page 12 of the Select Committee report shows that the brunt of the intervention has been borne by Japan, Taiwan, the United Kingdom and Germany, not by America.
This is a year in which the Chancellor has the resources to make significant reductions and, I hope, significant reforms in taxation, and to stimulate enterprise even further. However, all the big spenders have the scent of money in their nostrils, and every pressure group imaginable is demanding more and more spending. The Chancellor should not give in to those strident demands. He should use the resources available to lower borrowing, and to reduce interest rates and taxes. Our economy is in a healthy state, and the hand on the tiller is perhaps the


most able of this century. There may be economic storms ahead for the whole world, but we can be hopeful that Britain will come through relatively unharmed.

Mr. Alex Salmond: A few years ago, a bright young financial journalist wrote:
In my mind the great social justification for a mildly inflationary economy is that a society in which borrowers do better than lenders of money is fundamentally more attractive than one in which the reverse is true.
I have often wondered what happened to the ideas and ideals of that young journalist—particularly now that he occupies No. 11 Downing street. One of three cardinal errors in the Government's approach to the economy has been consistently to create an economic environment that has favoured the lenders rather than the borrowers of money. This culminated in 1986, when real interest rates over the average for the year—taking the three-month Treasury rate compared with inflation—reached plus 7 per cent., one of the highest rates of the century.
The Government claim consistency for their economic policies. Certainly interest rates, at least, have been consistently high, but the reasons for that have been changing all the time. When the Government first came to office, there were high interest rates in hot pursuit of sterling M3. That was eventually given up as being unmeasurable. Some three years ago, the Chancellor hiked interest rates to stabilise the currency, and latterly we have had high interest rates to stop so-called "overheating" in the United Kingdom economy. The phrase "overheating" comes as a bitter irony to regions whose economy is still in deep freeze. Industrial production in Scotland, for example, has not even returned to the levels of 1980. How, then, are we to reflect on a Government who talk about high interest rates to stop overheating of the economy?
Conservative Members used to say — perhaps they still do—that there was a direct relationship between the level of interest rates and that of public borrowing: the higher the level of public borrowing, the higher that of interest rates. Among the many "achievements" of the present Chancellor has been to establish that, in the United Kingdom over the past eight years, there has been an inverse relationship between the level of public borrowing and that of interest rates. Over the period between 1979 and 1986, the public sector borrowing rate went from £10 billion to £3·5 billion. Over the same period real interest rates rose from minus 1 per cent. to plus 7 per cent. Under the Government, the lower the level of the PSBR, the higher the level of real interest rates.
What has it taken to get any amount off the real level of interest rates? It has taken a 25 per cent. stock market crash. I was talking the other day to one of my constituents, a hard-pressed farmer, who asked why there was at last some relief in the level of interest rates. I replied that the reason was a 25 per cent. stock market crash. He replied that he wanted a fall of another 25 per cent. so that he would secure another 2 per cent. off the interest on his borrowing.
That reflects real feeling in the real economy—the manufacturing and the producing economy — that its interests are being made subservient to those of the financial economy. Instead of growing with the manufacturing economy, the financial economy has grown

at its expense. In the 10 years between 1976 and 1986, the financial sector increased its share of gross domestic product from 11 per cent. to 16 per cent. In the same period, the manufacturing sector declined from 29 per cent. to 24 per cent. The financial sector has been allowed to grow at the expense of the real economy. The Government have committed the error warned of by a previous Tory Chancellor of making industry too poor and finance too proud.
In later life Churchill conceded that he was probably the worst Chancellor in British history. To be fair to the great man, he wrote that before the term of office of the right hon. and learned Member for Surrey, East (Sir G. Howe). That right hon. and learned Gentleman has the distinction of wasting the greatest economic opportunity of modern times—more than £100 billion of oil revenue protection for the United Kingdom's balance of payments. For generations successive Governments have been "blown off course" because of pressure on the balance of payments. The Government came to office with no constraint, but what did they do? They invented their own constraint and introduced the sterling M3 target.
I was interested in the remarks made by the right hon. and learned Member for Richmond, Yorks (Mr. Brittan), who demonstrates that the spirit of 1979 to 1981 still haunts the Conservative Back Benches. However, how on earth can he talk about regenerating the regional economy of the United Kingdom when he simultaneously advocates a policy of fiscal retrenchment?
I regard the appropriation of Scottish oil revenues as probably the greatest piece of international larceny since the Spanish stole the Inca gold. However, such action would have been much easier to bear if the oil revenues had been used to finance expansion and investment in the economy instead of being used to finance monetarist experimentation and retrenchment, and if Scotland had not been forced to bank-roll the Government's economic policies for the past eight years. Despite that, the Chancellor still has the effrontery to come to Scotland and tell the people how dependent we are on the largesse of the Treasury!
The monetarist experiment is now over, but the economic consequences live on. They live on with the reemergence of the balance of payments as the major restraint in the United Kingdom economy. In the Autumn Statement discussed today we have had the forecast of a £3·5 billion balance of payments deficit this year and there is the possibility of it increasing next year to £5 billion or £6 billion. The United Kingdom will have to pay its way through the world without the comfort of massive oil revenues and with a vastly reduced industrial base.
The third major failing in the Government's approach to the economy is their lack of any attempt to redress the serious regional imbalances in the United Kingdom. Perhaps the greatest single cause of inflationary pressure within the United Kingdom economy at the moment is spatial imbalance. The south-east the south-west and East Anglia are bidding up prices throughout the country. Government policy, far from redressing that balance, in many ways reinforces it.
Let us consider the fiscal and transport subsidies that are available to the south-east of England, London weighting, and the massive defence expenditure based along the M4 corridor. Such subsidies, together with mortgage tax relief, represent massive implicit subsidies for the most privileged corners of the United Kingdom.


The south-east of England houses 30 per cent. of the United Kingdom population, but it obtains 50 per cent. of the available mortgage tax relief. That represents an excess subsidy over that region's population share of £1 billion. That should be compared with the regional aid budget for the whole of the United Kingdom. We find that mortgage tax subsidy — an excess subsidy for the south-east of England—is now worth more than the entire regional aid budget for the rest of the United Kingdom, and that is before taking into consideration the recent announcement on regional aid.
It is part of the hypocrisy of the present Administration that public expenditure in the regions and nations of the United Kingdom is described as an unacceptable subsidy, but massive tax subsidies for the south-east of England are said to be "fostering the enterprise economy".
The Government have critically weakened the United Kingdom's industrial base as a result of high interest rate and high exchange rate policies. Secondly, the vast opportunities of the oil revenues have been wasted. Thirdly, and perhaps most important, no attempt has been made to redress the maldistribution of resources. The Government have concentrated power, income and wealth in the south-east corner of the United Kingdom, which just happens to be occupied by the Conservative party's friends, sponsors and voters.

Mr. Andrew Mitchell: I shall be brief, not least because I am an enthusiastic co-sponsor of the early-day motion proposed by my hon. Friend the Member for Wokingham (Mr. Redwood) that urges that Back-Bench speeches should be limited to 10 minutes.
I wish to make three points. First, this year's Autumn Statement has been delivered against a background of profound international turbulence and nervousness in the financial markets. For many years, we were used to the British economy being rather less certain, more turbulent and less successful than other Western, or indeed Eastern, developed economies. Now the position has been reversed. In many ways, our economy is performing in much the same way as it did in the 1950s — inflation perhaps a little lower here and growth perhaps a trifle higher there. However, in the 1950s we were performing much worse than our main competitors—now we are performing rather better.
There must be something refreshing and perhaps invigorating for my right hon. and hon. Friends on the Treasury Bench about the way in which their policies and views have been copied around the world. That has occurred not only in countries with Administrations that follow avowedly free-market policies. So-called Socialist Governments in Scandinavia, Spain, Australia and New Zealand are pursuing policies similar to our own. That can hardly be dismissed as coincidence. In New Zealand and Australia, there has been a conversion to policies traditionally denoted as Thatcherite—a conversion to policies of minimum tax interference in the workings of the market and a philosophy of tax neutrality. It is interesting to note that the Labour Governments of those countries were returned to power in the past year—re-elected on such economic policies.
Over recent years, we have seen the internationalisation of the markets in terms of competition, supply side and tax regimes. Those countries that bucked that trend — as France did for a while—are now safely back on board.

The alternative is simply too unpalatable. The countries that are winning are those which have competitive supply-side economies, which have competitive tax regimes and labour markets that work, and which are privatising and deregulating.
It is a truism that such greater internationalisation makes international co-operation vital. I believe that the concerted action behind the Louvre accord is absolutely essential. The accord has nothing to do with stopping international trends. It is not about seeking to prevent long-term market adjustments. It is about ensuring that the least amount of concerted intervention has the maximum impact on limiting the gyrations of the currency markets. Without such intervention, our industries and economies are too much at the mercy of the currency speculators.
My second point is that we are now in a strong position because of the consistency and sense of purpose of the policies that we have followed for the past eight years. Those eight years of caution and prudence have paid off. We have finally got public expenditure under control. We should keep growth in public spending within the prospective growth of the economy. The worst message that we could now give is that we have money to burn.
The corporate reforms enshrined in the 1984 Budget have had a dramatic effect. Corporate profits are now at an all-time high, with all the consequent gains for investment and new employment. I now look forward to a Budget that will include the major personal tax reforms that would be most beneficial to the supply side of the economy.
My third and final point is that I have some sympathy with paragraph 19 of the Select Committee report that deals with the determination of public expenditure priorities centrally, and particularly in respect of the NHS. The report makes the point that NHS expenditure has massively increased. Through medical research and discovery and the opening up of marvellous new medical cures and treatments, the demands and the need for funding medical care are increasing and will continue to increase. How we bridge that gap and how we increase the amount that we spend as a country on health care is a matter which exercises all hon. Members on both sides of the House. It is not a matter which I propose to pursue now.
However, the manner in which we target additional funds to the NHS is relevant to the debate. An overrun budget in a hospital department or a growing waiting list are not necessarily evidence only of need. They may be evidence of gross inefficiency and the misuse of resources For example, we know that some hospitals spend three times as much as their neighbours on the same operation. We need to know much more about that phenomenon within the NHS if we are to ensure that increases in funding are to reach directly and effectively those in need. To achieve that aim we must develop the internal market within the NHS. That is the best way to ensure value for money, support better health practice and enable funds to stretch further in the interests of patients.
The Autumn Statement offers steadily rising living standards, rising employment, low inflation and impressive growth. It was presented to the House against the background of an increasing international consensus of Governments of both the Left and the Right on the rectitude and success of this Government's policies.


Tonight we shall see whether Opposition Members are moving towards accepting that consensus, or whether they wish to buck the trend and remain out in the cold.

9 pm

Mr. Austin Mitchell: I want to emphasise how much the Chancellor has done during recent months to kill the goose that laid his golden eggs through a series of actions which have been directly harmful to British manufacturing industry.
The first and most dangerous of those actions was to encourage the pound to rise in value. The system of putting the pound into a relationship with the deutschmark when the deutschmark has to go up means that the pound has been rising and becoming dangerously uncompetitive. There has been a major loss in competitiveness during the past few months. A major real over-valuation compared with 1986 has emerged.
That tendency has been further sustained by the high interest rate, which the Chancellor refuses to reduce. Indeed, the Bank of England does not want to reduce it because it considers that the Chancellor has allowed credit to expand so enormously that any reduction in interest rates will boost the credit bubble again. Therefore, we are trapped in a policy of high interest rates and an overvalued pound, when it is logical that the pound should fall with the dollar, if we are to maintain our competitiveness in the American market which has produced two thirds of manufacturing exports since 1979. We have become dependent upon the American market. The dollar still has some way to fall. It is no use the world trying to shore up the dollar. We cannot push water uphill by international agreement. The pound needs to come down with the dollar.
The terms of trade in manufactures are now, at 104, worse than they were at the height of the monetarist depression in 1981. That forebodes the same consequences for manufacturing industry — the loss of jobs and exports and the rise of imports—as resulted from that depression. It means that expansion must now come to an end. We are now at an interesting turning point which will prove either the monetarist, moralist philosophy of economics that we have heard so much about from Conservative Members or the argument that I emphasise, that competitiveness and industrial health are based on the exchange rate, and that we need a competitive exchange rate for a healthy, exporting, competing manufacturing industry.
If the exchange rate hypothesis is correct, the economic consequences of the next few months will be serious to British industry. If the monetarist, moralist interpretation—to which several Conservative Members have referred—is correct, we shall be able to ride it out with only a slight setback in growth. We are now at that interesting test point. It is my thesis that the Chancellor needs to provide for some of the problems that we will have with our exports by expanding the domestic economy much more than he seems to envisage with the present halfcocked expansion, which is doing nothing to make up the ground we have lost or to bring down unemployment.
As a country, we are under-borrowed compared with competing economies and compared with what we need to do to sustain economic activities. If the exchange rate thesis is correct, it is ludicrous to cut borrowing, and even

more ludicrous to be over-funding to try to damp down the credit explosion, which is what the Government are doing.
I conclude by saying that the next few months will provide a serious test, which bodes ill for British manufacturing. With the over-valued pound, the terms of trade and the high interest rate burdens with which it is compelled to compete, the prospects for survival of manufacturing and for a continued fall in unemployment are dire indeed.

Mr. Gordon Brown: This has been an interesting and informative debate in which we have had a maiden speech by the hon. Member for Wimbledon (Dr. Goodson-Wickes). He concentrated, appropriately for his position as a doctor, on many of the issues facing the Health Service. His speech was eloquent and excellent in its delivery, even if it concentrated on the silver linings of the Health Service at the expense of the dark clouds on the horizon.
The debate was also dignified by speeches from the Chairmen of the Select Committee on Treasury and Civil Service and the Public Accounts Committee. The debate has been graced too by speeches from my right hon. Friends the Members for Blaenau Gwent (Mr. Foot) and Bethnal Green and Stepney (Mr. Shore) and from my hon. Friends the Members for Durham, North (Mr. Radice), Gateshead, East (Ms. Quin) and Great Grimsby (Mr. Mitchell).
The debate may be remembered most for the interesting speech by the right hon. Member for Shropshire, North (Mr. Biffen) who suggested that the 1p or 2p that might otherwise have gone to tax cuts would be better spent on the National Health Service, the amount being £2·5 billion if reckoned at 2p. He has done more in a few minutes to speak up for the traditions of one-nation Toryism than the Chancellor has done in eight long years as a member of the Conservative Government.
When we face one of the biggest crises in the National Health Service in its 40-year history, when we still have 2·5 million unemployed and 5 million on supplementary benefit, and when 8 million are dependent on these benefits and 16 million are on low incomes, one might have thought that the Chancellor would at least have paused this afternoon to consider some of the tasks that remain undone. One would have thought that the self-congratulation might have been interrupted to take note of the poverty, deprivation and misery in our midst, and that we might have heard from the Chancellor, if not a promise or a commitment, at least the offer to consider using some of our national resources to relieve poverty, further to reduce unemployment and to help the National Health Service, which is in such need.
But the truth about the Government has been revealed, as my right hon. and hon. Friends have said so eloquently. Even though the Government have the money—with the windfall of North sea oil revenue being higher than expected, money available to them by good fortune rather than by good management — even though they have been made aware from both sides of the House of the needs of the people, even though to secure re-election they made certain promises and even though they can see for themselves the employment benefits of spending and investing the money, the Government refuse to spend enough on Britain. Money that was once withheld on


grounds of financial prudence is now withheld for reasons that can only be described as ideological. Again and again in the last eight years the Government have said that they would spend if they could. Now they can, and they will not.
If the economy is as successful as the Chancellor has said, why cannot he spend sufficient money to provide a decent level of pensions for 9 million pensioners? Why has he had to freeze child benefit for the 7 million mothers and 12 million children who depend on it, and why for the first time in 40 years has he had to introduce charges for a visit to the optician and dentist to raise £170 million?
If the economy is fundamentally far stronger than it has ever been, as the Chancellor said at the new year, and if we are to look forward to long-term sustainable, secure growth and rises in living standards, why by the one test of these economic prospects—the level of investment in training, in education, in research and development, and in machinery and plant — have the Government done worse and why are they still doing worse than all our major competitors? Why as a result of the Autumn Statement will the Government continue to do worse in the next three years?
Why are we investing less in ourselves—as a share of our national income—than all our major competitors, including Japan, which appears to be investing 50 per cent. more than we are? Why is no other country in the industrialised world, with the exception of Belgium, investing less in its economy? Why are we investing less as a share of our gross national product in the oil-rich 1980s than we did in the 1960s and the 1970s?
If the Chancellor will not listen to me, will he listen to the Confederation of British Industry, which had this to say a few weeks ago about our growth rate:
The momentum will not be sustained without much higher levels of investment in research, development and training, as well as fixed capital.
And, if he will not listen to the CBI, will he not listen to the Engineering Employers Federation, which said in its Budget submission:
We believe the level of investment expenditure in the UK to have become disturbingly low … What concerns us is that growth will be unsustainable without increased investment, training and research and development.
Faced with that record of low investment generally, might we not have expected the Chancellor to be telling us in his Autumn Statement how he is to bridge that gap in all those major areas, how he is going to make up that investment shortfall, especially when we know that in the public sector we invest 40 per cent. less per head than is invested in Germany and 200 per cent. less than is invested in Japan?
Is it not the case — and I expect detailed answers from the Chief Secretary when he replies this evening—that, far from narrowing, that gap will widen as a result of the Autumn Statement: £100 million a year less in local authority direct investment each year until 1990; £800 million a year less in public sector capital investment each year until 1990; a 2, 3, 4 per cent. decline in the amount of money invested by the Government in our economy? No wonder the CBI has also said that
the cuts in public sector capital spending must be reversed.
The Government's argument throughout all this is that spending has been sufficient, even when all the evidence from doctors, teachers, industrialists and public servants has been the opposite. If the Chancellor believes that spending is sufficient, has he looked at the state of our

schools? One million of our primary schoolchildren are being educated in classrooms built before the first world war, on which, as a result of the Autumn Statement, only 2 per cent. of the money needed for vital repairs is to be spent. Has he visited our hospitals, where two thirds of the wards were built in the days of the voluntary and charity hospitals and even now nurses are having to leave their patients to run flag days to raise money for vital equipment and repairs? Has he seen the condition of our inner cities and our regions? Has he looked at our roads and railways? Does he not understand that what we do not invest in infrastructure today we shall have to spend on more unemployment tomorrow?
Nowhere is the need for greater investment more clear than in research and development, science and innovation. Prior to the last election the Government promised that they would spend more money in this area. They promised more support for single industry research. They commissioned and received the Bide report on information technology. They gave the impression that they would sponsor further space research. They promised £200 million for the collaborative programme in electronics called LINK. But since the election there has been not a penny more for single industry support, which is now abolished; not a penny more for space research, as, further, we pull out of the European programme; not a penny more for the second stage of Alvey, for which the demand was for £400 million and which is to receive around £30 million; not a penny, after 13 months, for the LINK programme in electronics. Is it not a scandal that, 13 months after the Prime Minister announced the creation of the LINK programme in electronics, not a penny has been spent, especially when the Prime Minister said as she announced it in December 1986 that it was
essential that advances were rapidly exploited"?
The Government claim that they are spending more when they are spending less, as a Government, on industrial research and development. Perhaps that is what the Department of Trade and Industry meant when it claimed recently in its press release that it was
helping to translate science fiction into fact".
All this has happened since the Prime Minister took personal responsibility for our research and scientific effort.
Education, promised more in the Autumn Statement and at the election, receives less after we take into account the election year teachers' salary commitments and redundancies in our universities. The vast majority of British young people leave school at the earliest opportunity without qualifications. Half as many workers in Britain have technical qualifications than their counterparts in the United States, Japan and West Germany. A lower proportion of our people are in higher education than in any European country with the exception of Portugal. If we followed the example of Japan, the United States and West Germany, 500,000 more pupils would stay on at school. One million more pupils would leave with higher grade qualifications and there would be 500,000 more people in our universities and colleges.
We are now doing worse than countries far smaller than ourselves. South Korea, with a population of 50 million, has 1,200,000 university and college students, yet Britain, with a bigger population, has only 800,000. Our best prospect now appears not to try to stay level with Japan, but to keep up with Taiwan, not to beat West Germany,


but to stay up with South Korea. Are Conservative Members proud of the fact that, instead of pursuing the ambition to have the best educated, best trained, best qualified working population in the world, we are spending much less than most of our European competitors on education?
The cuts are nowhere more obvious and alarming than in the Government's policy towards our regions. The latest Government figures show that more than one million jobs have been lost since 1979 in the north, Scotland and Wales. The latest Government figures published in December show that the real value of manufacturing investment is still 35 per cent. lower in the north than it was in 1979, 33 per cent. lower in Yorkshire, 30 per cent. lower in the north-west and 27 per cent. lower in Wales. Most damaging of all is the high permanent unemployment, emigration and forced depopulation in one part of the country when we have overheating, congestion, skill shortages, pressure on the green belt and escalating house prices in another part of the country. That is neither good for the regions nor for the country as a whole.
What is the Government's reaction? On Tuesday they published a White Paper which makes a virtue of the fact that they will cut automatic regional aid which was worth £800 million in 1979, £200 million this year and will be worth nothing in the future. They plan to replace it with private consultancy services, one-stop shops and advisory services whose chief feature is that they will benefit the more prosperous regions more than they will ever benefit the disadvantaged regions. What has happened to the bipartisan tradition in regional policy? Regional policy was started by a Conservative Government when unemployment in the regions was 4 per cent. to 5 per cent. The Government are now abandoning it when unemployment is still about 14 per cent. to 15 per cent. in most of our industrial regions.
What about the promises to the inner cities? They are now in danger of moving from depression to recession, without ever having enjoyed an intervening period of recovery. Where is the new investment that will benefit the inner cities? Does the Minister not realise that the small amounts given by the Prime Minister to urban development corporations, city action forces and inner city task forces have already been taken away in cuts in rate support grant, and regional aid, and further cuts, even at the heart of the urban programme?
I do not know how Conservative Members can deny that. At the election the Secretary of State for Trade and Industry made a great virtue of the fact that the programme for the inner cities would have to be self-financing. The Chief Secretary said:
We will not succeed by spending money".
The British economy was not to have performed like that. It was to be quite the reverse. I shall finish the quotation:
We can only tackle the problems of the inner cities by direct action to encourage local initiative, by giving people the opportunity to be self-reliant.
Does closing schools in the inner cities provide the opportunity to be self-reliant? Does cutting the number of beds and wards in hospitals give patients the opportunity to be self-reliant?
Did the Government ever intend to do anything for the inner cities? We are told that on election night the Prime Minister said that something had to be done for the inner

cities. But when it was suggested to the Prime Minister when she visited the north-east a few months ago on her walkabout that she had said that something had to be done for the inner cities, she said:
That was not quite what we said.
Notice the royal "we".
We said that we wanted to win back those inner cities to our cause.
That was not a commitment to jobs in the inner cities, just to votes in the inner cities. Success is to be judged not by how much people in the inner cities were assisted, but by how much the Tory party in the inner cities was assisted.
Is that not the old trick — to hold out as long as possible by denying that there is a problem in the inner cities, the Health Service, or the education service or anywhere else, and then to turn out a huge and grand new initiative more to do with public relations than public policy changes?
Is that not what happened to the enterprise zones, announced with a great flurry in 1979 and quietly abandoned by the Government with a press release on Christmas eve? Is that not what happened with the great new initiative for 20 city technology colleges announced in October 1986 by the Secretary of State for Education, only four of which have been designated and none of which has been opened?
What about all the other initiatives? Remember Britain 2000 and Mr. Richard Branson of Virgin Records? Mr. Branson was brought in to clean up the litter. Mr. Branson cleaned up; the litter remained — government not by grand and great design, but government by gimmick and government by gesture. We do not get job campaigns for our inner cities and regions, simply advertising campaigns.
As we near the next election, the Prime Minister will return to the inner cities and, just as she did with unemployment, she will declare the problem of urban deprivation to be solved, no doubt after 19 changes in the definition of "inner city". The nation knows that the inner city crusade is a crusade without cash. The problems of the inner cities and regions will last until domesday if the Government's policies are all that confront them.
What of the National Health Service which has been mentioned by so many people this evening? When we know that the NHS needs at least an additional 1 per cent. above inflation for demography; when it needs another 1 per cent. to keep pace with technology; when we know that, to make good the shortfall that exists at the moment and to make up for the nurses' salary awards that were never properly funded, another 1 per cent. is needed; when we know on the Government's own figures, given by them to Select Committees and in documents that are available to the House, that the minimum that the Health Service would need is an increase in real terms above inflation of more than 3 per cent., what is the proposal in the Autumn Statement? What is the proposal, stripped of its pretentions, after taking into account the announcement just before Christmas of another 100 million this year?
When the Health Service needs at least an extra 3 per cent. above inflation, the Autumn Statement proposes 0·7 per cent. That is the best that the Autumn Statement can do. We find ourselves with one quarter of the money that is needed. [Interruption.] The Chief Secretary says that he will give the figures. The statisticians in the Treasury will now be at work. The figures are clear in the Autumn Statement. One should take account of the fact that


spending is to rise by £100 million this year, and if that is not compensated for next year by another announcement there will be a cut.
The Government used to tell us that they would spend if only they had the money. Now they have the money and they still refuse to spend. It is not a shortage of cash in the Treasury that is depriving the Health Service of resources; it is a shortage of compassion and concern on the part of the Government. It is not the absence of money; it is the absence of morality in the Government. If they do not accept what we say, let them look at the evidence around the country. I shall not take the most publicised versions of what has been going on in different areas and communities. All one needs to do is to listen to the health authorities, the doctors and the patients.
One has only to listen to the consultants in Birmingham who, on Monday, had to form a committee to save the Health Service; to listen to the Cornwall health authority, which yesterday had to close a 79-bed hospital to save £500,000; to listen to the Greater Manchester health authority, which says it cannot even pay its salary bills and whose cash is running out—any other authority in that position would have been declared bankrupt; to listen to the people from the midlands whom the Prime Minister refused to meet this afternoon; to listen to the Shropshire health authority, which is faced with a decision to close 10 hospitals with a loss of 367 beds; to listen to them all to know that waiting lists are at 850,000 throughout the whole of the United Kingdom, we have lost 46,000 beds since 1979, 30,000 nurses are leaving the Health Service every year, and if the Government do not spend the money that is required, the Health Service faces the rest of 1988 with a crisis on its hands.
The position of the Government and of the Prime Minister is that the private sector must be encouraged to bridge the gap, even when she knows that the National Health Service is more efficient, less administratively expensive to run and that, in a unique way, it combines economy with equity. Even though all those things are known, and the Prime Minister knows that the public want to spend money on health—and want it spent on the National Health Service — she refuses to invest any more. She would prefer private money being used ineffectively to public money being used productively. She believes in the private sector, not because it is more efficient—it is not—but because it is the private sector. She opposes the extension of public provision, not because she thinks it is inefficient, but merely because it is public. In that way, she would reduce our great National Health Service, which is internationally admired and the envy of the world, to the economics of her corner grocer shop and the morality of the worst ethics of the stock market. Thereby denying people the security of a national service and replacing it with the uncertainty of dependence on free market forces, she then parades that choice as an extension of freedom.
My right hon. and hon. Friends have said today that the Chancellor faces a choice. We are told that he is considering reducing the top rate of tax for the top 4 per cent. of the population, at a cost of £850 million. Why does he not spend that money properly on the National Health Service, education and the public services? We are told he is considering abolishing capital gains tax, which is paid by the top people in this country, raising just over £1 billion. We are told that he is considering abolishing inheritance tax, which raises £1 billion from those who are

rich enough to inherit sums of more than £90,000. Is it not clear to the Chancellor that the wish of the country arid of the vast majority of its people is that, instead of tax cuts to make the rich few who will benefit from them richer, the money should be spent on our Health Service, public investment and the expansion of our public services?
No Government have had the advantages of North Sea oil revenues of £60 billion of windfall money that this Government have enjoyed. During these past eight years, no country has lost so many jobs in productive industries or has invested so little a share of its national income in its industry or public services, with the result that no country faces the future so ill-prepared for the problems of the 1990s or the 21st century. If the Germans had discovered oil, would they have closed down the Ruhr and invested all the money abroad? Would the Japanese have closed down their computer industry and put all their money abroad?
The message to the Chancellor from the country is clear. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said earlier, the Chancellor may have changed his tune about the importance of the money supply and about the wisdom of leaving interest rates and exchange rates to the vagaries of free market forces, but on the issue of public investment, especially investment in the National Health Service, he has refused to learn from his mistakes. Even when he has the money and knows the needs, even when the Prime Minister has made promises, and when we can see the employment benefits of investing in the National Health Service, in education and the industries of this country, the Chancellor refuses to invest more in Britain. His is a message of dogma and ideology. What this country needs is realism and common sense, and for that it will have to look to the Labour party.

The Chief Secretary to the Treasury (Mr. John Major): The hon. Member for Dunfermline, East (Mr. Brown) has just made his debut as an Opposition Front Bench spokesman on the economy. He spoke with considerable eloquence and passion, but what he said was a welter of misleading and half-understood statistics, almost all of which were wholly inaccurate.
The hon. Gentleman had much to say about jobs, but nothing to say about falling unemployment. If the hon. Gentleman read the Autumn Statement, he clearly did not understand it. He refered to social security cuts, but made no acknowledgement of the £48·5 billion that is made available in the Autumn Statement. He referred to education restraint, with no acknowledgement of the extra £630 million over last year's provision.
The hon. Gentleman referred to inner cities with no acknowledgement of the fact that this year's public expenditure plans will bring total urban spending to £500 million a year, which is two and a half times more in real terms than the amount spent by the Labour Government at any time during their period of office. The hon. Gentleman made no reference to the substantial growth of initiatives that the Government have produced in recent years for the inner cities, such as urban development corporations, urban development grants, urban regeneration grants, enterprise zones, the inner city initiative and Estate Action. None of those initiatives has reached the


hon. Gentleman. I do not know where he has been for the last few years, but I dare say that Rip Van Winkle is better informed than the hon. Gentleman about what is going on.
The hon. Gentleman referred to investment, but made no mention of the fact that in the economy as a whole investment was at record levels last year. Indeed, in the first three quarters of 1987 it was up 3·5 per cent. on the previous year's record figures. All those facts were overlooked by the hon. Gentleman in his welter of misleading statistics.
However, until the hon. Gentleman's speech we had had an interesting and thoughtful debate, which was marked by several excellent speeches, including an extremely eloquent maiden contribution from my hon. Friend the Member for Wimbledon (Dr. Goodson-Wickes). My hon. Friend paid a warm and generous tribute to his predecessor, Lord Havers. We all join my hon. Friend in wishing the noble Lord a full recovery soon from his recent illness.
My hon. Friend called for more publicity for payroll giving to charity. I congratulate him on turning his maiden speech towards a most important and interesting topic. I shall certainly draw his remarks to the attention of my right hon. Friend and I hope that those in industry and commerce who deal directly with payroll giving will take my hon. Friend's remarks to heart.
My hon. Friend has the triple attributes of being an occupational physician and barrister and a former serving officer in the Army. I have no doubt that the House will make ample use of his knowledge and talents in all of those areas, and will look forward to hearing from him on many occasions.
It is not often that events in the world economy take centre stage in British politics, but the effects in world markets and the responses of the major countries have justifiably and understandably raised serious questions in people's minds. It was, therefore, entirely appropriate that my right hon. Friend the Chancellor should have devoted so much of his opening speech to those issues.
While the fall in stock markets and the instability of the dollar have made the outlook more uncertain, this is clear to those who wish to see it. The British economy has the strength to weather any external difficulties that might arise. That strength is founded on the sound public finances that we have set out clearly in the Autumn Statement. The statement sets out our broad plans for public expenditure. The House may wish to know that the public expenditure White Paper, which will give our detailed plans, and better inform the hon. Member for Dunfermline, East, will be published next Wednesday. I am sure that we will then have the opportunity to debate it in the normal way, once the Select Committee has concluded its consideration.
The right hon. and learned Member for Monklands, East (Mr. Smith), who is at present enjoying a no doubt fascinating conversation with his hon. Friend the Member for Wrexham (Dr. Marek), spread his net quite widely. I shall turn to his comments on the National Health Service in a few moments.
When the right hon. and learned Gentleman hinges his remarks on opinion polls, as he did, perhaps I may remind him of an opinion poll last June that left him in Opposition and the Government in power with a substantial majority.

Before he starts lecturing the Government about opinion polls and public attitudes, he might remember the result of the election just a few months ago.
It was generous of the right hon. and learned Gentleman to assume that my right hon. Friend the Chancellor might have a fiscal adjustment available for his Budget. That is not only generous, but curious too, as before that June opinion poll the right hon. and learned Gentleman and his hon. Friends were repeatedly telling the country to expect higher taxes and public expenditure cuts.
I am gentler than my right hon. Friend the Chancellor, so I will not quote the explicit words of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). [HON. MEMBERS: "Go on."] No, I am much too gentle for that. The fact is that the Opposition were wrong about public expenditure and they have changed their minds about our tax prospects. If the Opposition were so wrong and have changed their minds so rapidly on those issues, I am not sure why they should assume that they are right now in anything that they say.
Before I respond to the right hon. and learned Gentleman's remarks, I wish to deal with the strength of our public finances, as set out in the Autumn Statement. Much of what has been said today reinforces the fact that the background to the debate is extremely favourable. Growth in manufacturing output continues to rise and there is a secure outlook for investment and inflation.
My right hon. Friend promised that I would deal specifically with public expenditure, and I propose to do so. Our plans include cash increases in the planning total of £2½ billion and £5½ billion in the next two years, much of which is directed specifically to priority programmes. I emphasise for the right hon. and learned Gentleman's interest that they are increases, not cuts, in public expenditure. Our plans also show a welcome and rapid fall in the share of national income taken by public expenditure, with the trend set to continue from 44 per cent. of gross domestic product in 1986–87 to 41¼ per cent. by 1990–91. That will be of special pleasure to my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan), who expressed his concern to ward off inflationary pressures and urged caution in our fiscal stance. I agree without qualification that prudence and caution are vital and I know that the Chancellor will have heard my right hon. and learned Friend's remarks with great interest.
Public borrowing this year is also down, to ¼ per cent. of gross domestic product — £1 billion — which is noticeably better than earlier expectations and the lowest for 18 years. This is in sharp contrast to elsewhere in the industrial world, where the ratio of Government debt to income has been rising. Here, as an act of policy, we have bucked the trend, and our debt interest payments have decreased from 5¼ per cent. of GDP in 1980–81 to 4¼ per cent. this year. Lest that seem an arcane statistic, I shall point out that the decline, which is set to continue, means that within our medium-term plans we are able to spend more on priority programmes and less on debt interest.
The 1 per cent. reduction in debt interest amounts to £4½ billion — precisely the sum by which next year's spending is increased before taking account of reserves. I hope that it is not too unkind to remind the House that if borrowing had stayed at the same proportion of national income that we inherited, the increased servicing cost this year would have been £8+ billion — nearly 7p on the


standard rate of income tax. That is where increased borrowing would have got this Government and the taxpayer, and that statistic was noticeably missing from the speech of the right hon. and learned Member for Monklands, East.
Nor did the right hon. and learned Gentleman make any mention of his pre-election claims of higher taxes and lower public expenditure if the Government were reelected. Nor, interestingly, in view of the way that he twitted my right hon. Friend the Chancellor about not covering all aspects of policy, was there any reference to the new economic strategy that the leader of the Labour party commissioned from the shadow team six months ago today. It may be that the future of other policies launched yesterday encouraged the right hon. and learned Gentleman to remain silent. In any event, Labour policies remain a secret after six months, while the alliance's have become a catastrophe after six hours.
The debate has repeatedly returned to public expenditure priorities, and the right hon. Member for Blaenau Gwent (Mr. Foot), his right hon. and learned Friend the Member for Monklands, East, my right hon. Friend the Member for Shropshire, North (Mr. Biffen) and a number of other right hon. and hon. Gentlemen referred specifically to the National Health Service. My right hon. Friend the Member for Shropshire, North set out some intriguing principles for the reform of the National Health Service and I have no doubt that they will be widely read and considered, although they seemed to receive no endorsement from Opposition Members who still live in a time of many years ago.
Few people would doubt the genuine affection in which the National Health Service is held. It has been manifested in recent weeks in calls for greater funding and I will return to that point in a moment. First, I wish to refer to Opposition Members who in recent years have repeatedly claimed that the Government simply do not care about the National Health Service.

Miss Marjorie Mowlam: The Minister's performance is absolutely pathetic.

Mr. Major: Not only is this not true, but remarks like that simply trivialise and debase what ought to be an important national debate—and the hon. Member for Redcar (Miss Mowlam) illustrates the point far more eloquently than I can. I have no doubt that Opposition Members care about the National Health Service, and I have no doubt that their predecessors cared 10 years ago when they imposed on the Health Service the largest capital cuts it has faced at any time in its history. So the question is not about who cares — we all care — but about how to achieve the quality and quantity of service that we all wish to see. In that, money cannot be the whole answer. The pressures are clear.
The hon. Member for Walsall, North (Mr. Winnick) is present with us. Lord Wilson of Rievaulx once referred to the hon. Gentleman as the silliest man in the House. Clearly, that was one of the noble Lord's characteristic understatements.
The pressures on the NHS are clear. Demographic changes, an aging population, medical improvements and greater expectations have all led to the calls for greater funding. If we are genuinely concerned not about making political points but about getting the best possible Health Service, that cannot be the whole answer. [Interruption.]

It is interesting that the Opposition are not genuinely interested in the Health Service but only in making partisan political points about the Health Service.
The House is familiar with the growing resources devoted to the service, the increasing number of patients treated and the increasing number of medical staff employed. [Interruption.] I see that the hon. Member for Walsall, North is making his usual intellectual contribution; he is welcome.

Mr. Winnick: Does the Minister use the NHS?

Mr. Major: The answer to the hon. Gentleman's question is yes.
For next year, the net increase for the whole of the National Health Service is £1·15 billion and a similar increase is already committed in the public expenditure plans for the second year in the public expenditure programme. To that £1·15 billion must be added the proceeds of cost improvements programmes, income generation schemes and, to supplement capital programmes, the resources raised by surplus land sales.
We are witnessing extensive public examination of the resources put into the Health Service and I believe that we need equally careful consideration of what we get out of the Health Service as a result of the money that we put into it. Some of what we get is familiar and welcome: the extra medical staff responsible for patients, the extra 1 million in-patient cases, the extra 500,000 day cases and the extra 3·75 million out-patient cases. Those improvements in the service are concrete evidence that the Government have put in extra resources for care and that they have been used.
As the right hon. and learned Member for Monklands, East and my right hon. Friend the Member for Shropshire. North acknowledged, Governments alone cannot meet the infinite demands for health care.
We have to ask some uncomfortable management questions of the NHS if we are genuinely to confront the difficulties of getting the best possible patient care for the resources that are made available. Why are general surgical beds in some parts of the country empty for nearly seven days between patients hut occupied again in less than half a day in other parts of the country? That question deserves an answer. Why does it cost more in some hospitals than in others to do the same operation on the same type of patient? Why can so few health authorities tell us what a particular operation costs? Why do general surgery patients spend two and a half days in hospital before their operations in some health districts while in others they spend less than a day? Why, when there are said to be nursing shortages, do four-hour overlaps on nursing shifts still exist? Those genuinely concerned to improve the quality of our health care believe that those questions, as well as the question of resources, need to be addressed.
Moreover, those questions need an answer before we or the Opposition can know that shortage of funds is the problem. If the answers are unsatisfactory, the case for looking first to improve value for money becomes unanswerable.

Mr. Winnick: Will the Minister give way?

Mr. Major: No, he will not.
That is why, when responding to the problems arising this year, we insisted that the extra funds were


accompanied by an improvement in the arrangements for monitoring Health Service performance and why I believe that the results of that monitoring should be published in the interests of getting the best patient care.

Mr. John Smith: The Chief Secretary to the Treasury is aware that yesterday the heads of the three royal medical colleges met the Secretary of State for Social Services, who gave them certain assurances. Will the right hon. Gentleman say whether, in real terms, any extra money, on top of that committed in the Autumn Statement and in statements since, will be given to the National Health Service?

Mr. Major: The right hon. and learned Gentleman anticipated what I was about to say in a couple of paragraphs' time.
We all wish to ensure that patients are treated as well and as speedily as possible. If we are to do that we cannot and should not exclude medical practice and medical efficiency from consideration in the future. It is neither acceptable nor credible simply to blame the level of funding.
The right hon. and learned Member for Monklands, East referred to press comments following the meeting between the Secretary of State for Social Services and the presidents of the three royal colleges. I cannot answer for those press reports, but I can confirm that my right hon. Friend made it clear to the presidents that we had recognised the need to increase resources for health care in the public expenditure round that we have just concluded. Furthermore, last month we announced an additional £100 million for the National Health Service for the current year, and next year we plan to make available a record £21 billion, which is 32 per cent. more in real terms than under the last Labour Government.
We are launching the new income generation scheme and taking powers to increase health authority powers. As my right hon. Friend the Member for Shropshire, North said, we see the private sector as having an important role to play in the provision of health care. That is what my right hon. Friend made clear to the three presidents, and he did not suggest to them that further sums were about to be added to this year's public expenditure settlement.
The increase in public expenditure in real terms for the next year, in terms of the specific increase identifiable in the public expenditure White Paper, is around 2·1 per cent. With the income generation scheme and other schemes, that is likely, based on precedent, to be raised to a real-terms increase of about 3 per cent. in the next year, which is precisely the sum that the hon. Member for Dunfermline, East said was needed. That is the sum that will be available in the next year for the public expenditure settlement that has just been concluded.
The Autumn Statement shows that the National Health Service has been a major beneficiary, with an increase of £700 million over plans in England. There have been other significant additions to the programmes that I have mentioned and other programmes as well.

Mr. Winnick: Will the Minister give way?

Mr. Major: No.
The plans for education have been increased by £600 million, providing additional funding for universities, for

basic science and for improving the condition of school buildings. There are additions for law and order, in particular to provide for an expansion in the prison building programme that will amount to almost £400 million in the next financial year.
We have also, contrary to what was said, made substantial additions to our capital plans. Next year capital spending will be about £22 billion, which is £1½ billion more than we had previously planned. Of that increase, spending by nationalised industries accounts for about £660 million, and spending by local authorities, particularly on housing, another £560 million.
Priorities have been the theme of much of the debate. The Select Committee report, for which I thank my right hon. Friend the Member for Worthing (Mr. Higgins) and his colleagues, posed two important questions—how are priorities determined and what is the mechanism by which they are set? My right hon. Friend the Member for Worthing echoed those questions and I strongly suspect that he will follow them up when the Select Committee takes evidence on the public expenditure White Paper. I am delighted that he did so, for not only do they lie at the heart of successful planning and control of public expenditure, but they reveal clearly the difference between this Government and the Labour party.
For the Government, the setting of priorities means establishing the total public spending that can be afforded in the light of the need to keep borrowing down and to meet the Government's objectives for taxation, and then choosing what can be afforded for individual programmes and costing them. The approach of the Labour party is quite different but quite simple. It is a philosophy of, "Give them the money and to hell with the consequences, however inflationary they may be."
The right hon. and learned Member for Monklands, East has made that plain. He wrote in Tribune some time ago:
I'm not sure it's important to cost everything.
Later he said:
I'm cautious about writing down bits of money, they get added up by the Conservatives.
Until the right hon. and learned Gentleman learns that it is necessary to cost everything and add it up, he is not fit to be an Opposition spokesman, let alone Chancellor of the Exchequer—not that he is likely to get the chance, with their policies.
The Select Committee, to its credit, is looking for something a good deal more sophisticated, although it veers to the opposite extreme of searching for the philosopher's stone. I fear that that does not exist. There is no magic mechanism for comparing the merits of extra spending on one programme as against another. In the end, the judgment must be political. What there can be is a full appraisal of spending options, with an assessment of output so that the judgments can be informed judgments.

Mr. Winnick: This is rubbish.

Mr. Major: The hon. Gentleman is a specialist on rubbish. The prospect for reviewing policies is continuous, but the public expenditure survey is designed to draw the threads together year upon year.

Mr. Winnick: That is all he is good at.

Mr. Speaker: Order. The hon. Member must not shout across the Chamber.

Mr. Major: It is clear that the legacy of the noble Lord has upset the hon. Gentleman.
I know that my right hon. Friend and the Select Committee are uneasy that Departments are expected to look first to their own cash provisions to finance new initiatives. I make no apology for asking a Minister seeking additional resources to see what in the first instance he can contribute from his own programme to offset the savings. If savings cannot be found, his bid will have to be considered alongside those from other Departments and against the possibility of making reductions in existing programmes. To allow Departments to post off bids to the Treasury without having searched for offsetting savings would substantially weaken public expenditure control, and I have no intention of permitting that to happen.
We have heard a little today about cuts, but not as much as we often do. The dog has barked less loudly than usual. It may be that the Opposition are beginning to realise that it is possible to increase spending, reduce borrowing and cut taxes if we pursue policies that lead to an expanding economy. I remind the Opposition what real cuts look like: a 30 per cent. reduction in capital spending on hospitals and a 40 per cent. reduction in roads capital spending—the product not of this public expenditure survey but of those conducted by Lord Barnett.
Let me tell the Opposition what Tory "cuts" look like: a 36 per cent. increase in National Health Service capital spending, a 30 per cent. increase in the roads programme, and further increases in the coming years. Our cuts have been in borrowing and inflation, not in hospitals and roads. The cuts we have seen have been cuts by the Labour party in Labour headquarters in Walworth road and in the axing of that most enjoyable publication "Labour Weekly" only weeks after reporting that Labour lost the election on economic issues. "Labour Briefing" also has little affection for the Labour party, as it clearly shows.
The Autumn Statement reflects the greatly improving prospects for the economy. Public spending and borrowing are under control. Inflation is low and will remain so, investment is rising, unemployment is falling and there will be growth this year and next year. The Autumn Statement is a further signpost on the route to prosperity, and I commend it to the House.

Question put, That the amendment be made:

The House divided: Ayes 227, Noes 283.

Division No. 139]
[9.59 pm


AYES


Abbott, Ms Diane
Blunkert, David


Adams, Allen (Paisley N)
Boateng, Paul


Alton, David
Boyes, Roland


Anderson, Donald
Bradley, Keith


Archer, Rt Hon Peter
Bray, Dr Jeremy


Armstrong, Ms Hilary
Brown, Gordon (D'mline E)


Ashdown, Paddy
Brown, Nicholas (Newcastle E)


Ashley, Rt Hon Jack
Brown, Ron (Edinburgh Leith)


Ashton, Joe
Buchan, Norman


Banks, Tony (Newham NW)
Buckley, George


Barnes, Harry (Derbyshire NE)
Caborn, Richard


Barnes, Mrs Rosie (Greenwich)
Callaghan, Jim


Barron, Kevin
Campbell, Menzies (Fife NE)


Battle, John
Campbell, Ron (Blyth Valley)


Beckett, Margaret
Campbell-Savours, D. N.


Beith, A. J.
Canavan, Dennis


Benn, Rt Hon Tony
Carlile, Alex (Mont'g)


Bennett, A. F. (D'nt'n &amp; R'dish)
Clarke, Tom (Monklands W)


Bermingham, Gerald
Clay, Bob


Bidwell, Sydney
Clelland, David


Blair, Tony
Clwyd, Mrs Ann





Cohen, Harry
Leadbitter, Ted


Coleman, Donald
Leighton, Ron


Cook, Frank (Stockton N)
Lestor, Miss Joan (Eccles)


Cook, Robin (Livingston)
Lewis, Terry


Corbett, Robin
Litherland, Robert


Corbyn, Jeremy
Livingstone, Ken


Cousins, Jim
Livsey, Richard


Crowther, Stan
Lloyd, Tony (Stretford)


Cryer, Bob
Lofthouse, Geoffrey


Cummings, J.
Loyden, Eddie


Cunliffe, Lawrence
McAllion, John


Cunningham, Dr John
McAvoy, Tom


Dalyell, Tam
McCartney, Ian


Darling, Alastair
Macdonald, Calum


Davies, Rt Hon Denzil (Llanelli)
McFall, John


Davies, Ron (Caerphilly)
McKay, Allen (Penistone)


Davis, Terry (B'ham Hodge H'l)
McKelvey, William


Dewar, Donald
McLeish, Henry


Dixon, Don
McNamara, Kevin


Dobson, Frank
McTaggart, Bob


Doran, Frank
McWilliam, John


Douglas, Dick
Madden, Max


Dunnachie, James
Mahon, Mrs Alice


Dunwoody, Hon Mrs Gwyneth
Marek, Dr John


Eadie, Alexander
Marshall, David (Shettleston)


Eastham, Ken
Marshall, Jim (Leicester S)


Evans, John (St Helens N)
Martin, Michael (Springburn)


Fatchett, Derek
Martlew, Eric


Faulds, Andrew
Maxton, John


Field, Frank (Birkenhead)
Meacher, Michael


Fields, Terry (L'pool B G'n)
Meale, Alan


Fisher, Mark
Michael, Alun


Flannery, Martin
Michie, Bill (Sheffield Heeley)


Flynn, Paul
Millan, Rt Hon Bruce


Foot, Rt Hon Michael
Mitchell, Austin (G't Grimsby)


Foster, Derek
Moonie, Dr Lewis


Foulkes, George
Morgan, Rhodri


Fraser, John
Morley, Elliott


Fyfe, Mrs Maria
Morris, Rt Hon A (W'shawe)


Galbraith, Samuel
Morris, Rt Hon J (Aberavon)


Galloway, George
Mowlam, Marjorie


Garrett, John (Norwich South)
Mullin, Chris


Garrett, Ted (Wallsend)
Murphy, Paul


George, Bruce
Nellist, Dave


Gilbert, Rt Hon Dr John
Oakes, Rt Hon Gordon


Godman, Dr Norman A.
O'Brien, William


Golding, Mrs Llin
O'Neill, Martin


Gordon, Ms Mildred
Orme, Rt Hon Stanley


Grant, Bernie (Tottenham)
Patchett, Terry


Griffiths, Nigel (Edinburgh S)
Pendry, Tom


Griffiths, Win (Bridgend)
Pike, Peter


Grocott, Bruce
Prescott, John


Hardy, Peter
Primarolo, Ms Dawn


Harman, Ms Harriet
Quin, Ms Joyce


Hattersley, Rt Hon Roy
Radice, Giles


Healey, Rt Hon Denis
Randall, Stuart


Heffer, Eric S.
Rees, Rt Hon Merlyn


Hinchliffe, David
Reid, John


Hogg, N. (C'nauld &amp; Kilsyth)
Richardson, Ms Jo


Holland, Stuart
Robertson, George


Home Robertson, John
Robinson, Geoffrey


Hood, James
Rogers, Allan


Howell, Rt Hon D. (S'heath)
Rooker, Jeff


Howells, Geraint
Ross, Ernie (Dundee W)


Hoyle, Doug
Rowlands, Ted


Hughes, Robert (Aberdeen N)
Ruddock, Ms Joan


Hughes, Roy (Newport E)
Salmond, Alex


Hughes, Sean (Knowsley S)
Sedgemore, Brian


Hughes, Simon (Southwark)
Sheerman, Barry


Illsley, Eric
Sheldon, Rt Hon Robert


Janner, Greville
Shore, Rt Hon Peter


John, Brynmor
Short, Clare


Jones, Barry (Alyn &amp; Deeside)
Skinner, Dennis


Jones, Ieuan (Ynys Môn)
Smith, Andrew (Oxford E)


Jones, Martyn (Clwyd S W)
Smith, C. (Isl'ton &amp; F'bury)


Kaufman, Rt Hon Gerald
Smith, Rt Hon J. (Monk'ds E)


Kennedy, Charles
Snape, Peter


Kinnock, Rt Hon Neil
Soley, Clive


Kirkwood, Archy
Spearing, Nigel


Lamond, James
Steel, Rt Hon David






Steinberg, Gerald
Wareing, Robert N.


Stott, Roger
Wigley, Dafydd


Strang, Gavin
Williams, Rt Hon A. J.


Straw, Jack
Williams, Alan W. (Carm'then)


Taylor, Mrs Ann (Dewsbury)
Wilson, Brian


Taylor, Rt Hon J. D. (S'ford)
Winnick, David


Taylor, Matthew (Truro)
Wise, Mrs Audrey


Thomas, Dafydd Elis
Worthington, Anthony


Thompson, Jack (Wansbeck)
Wray, James


Turner, Dennis
Young, David (Bolton SE)


Vaz, Keith



Wall, Pat
Tellers for the Ayes:


Wallace, James
Mr. Frank Haynes and


Walley, Ms Joan
Mr. Ray Powell.


Wardell, Gareth (Gower)



NOES


Allason, Rupert
Couchman, James


Amess, David
Cran, James


Amos, Alan
Currie, Mrs Edwina


Arbuthnot, James
Curry, David


Arnold, Jacques (Gravesham)
Davies, Q. (Stamf'd &amp; Spald'g)


Arnold, Tom (Hazel Grove)
Davis, David (Boothferry)


Ashby, David
Devlin, Tim


Atkins, Robert
Dickens, Geoffrey


Baker, Rt Hon K. (Mole Valley)
Dicks, Terry


Baker, Nicholas (Dorset N)
Douglas-Hamilton, Lord James


Baldry, Tony
Dover, Den


Banks, Robert (Harrogate)
Dunn, Bob


Batiste, Spencer
Durant, Tony


Beaumont-Dark, Anthony
Dykes, Hugh


Bellingham, Henry
Eggar, Tim


Bendall, Vivian
Evans, David (Welwyn Hatf'd)


Bennett, Nicholas (Pembroke)
Evennett, David


Benyon, W.
Fallon, Michael


Bevan, David Gilroy
Favell, Tony


Biffen, Rt Hon John
Fenner, Dame Peggy


Blackburn, Dr John G.
Field, Barry (Isle of Wight)


Blaker, Rt Hon Sir Peter
Finsberg, Sir Geoffrey


Body, Sir Richard
Fookes, Miss Janet


Bonsor, Sir Nicholas
Forman, Nigel


Boscawen, Hon Robert
Forsyth, Michael (Stirling)


Boswell, Tim
Forth, Eric


Bottomley, Peter
Fowler, Rt Hon Norman


Bottomley, Mrs Virginia
Fox, Sir Marcus


Bowden, Gerald (Dulwich)
Franks, Cecil


Bowis, John
Freeman, Roger


Boyson, Rt Hon Dr Sir Rhodes
French, Douglas


Braine, Rt Hon Sir Bernard
Fry, Peter


Brandon-Bravo, Martin
Gale, Roger


Brazier, Julian
Gardiner, George


Bright, Graham
Garel-Jones, Tristan


Brittan, Rt Hon Leon
Gill, Christopher


Brooke, Rt Hon Peter
Glyn, Dr Alan


Brown, Michael (Brigg &amp; Cl't's)
Goodhart, Sir Philip


Bruce, Ian (Dorset South)
Goodlad, Alastair


Buchanan-Smith, Rt Hon Alick
Goodson-Wickes, Dr Charles


Buck, Sir Antony
Grant, Sir Anthony (CambsSW)


Budgen, Nicholas
Greenway, Harry (Ealing N)


Burns, Simon
Grist, Ian


Burt, Alistair
Hamilton, Neil (Tatton)


Butcher, John
Hanley, Jeremy


Butler, Chris
Harris, David


Butterfill, John
Hawkins, Christopher


Carlisle, John, (Luton N)
Hayes, Jerry


Carlisle, Kenneth (Lincoln)
Hicks, Robert (Cornwall SE)


Carrington, Matthew
Higgins, Rt Hon Terence L.


Carttiss, Michael
Hordern, Sir Peter


Cash, William
Howarth, Alan (Strat'd-on-A)


Chalker, Rt Hon Mrs Lynda
Howarth, G. (Cannock &amp; B'wd)


Channon, Rt Hon Paul
Howell, Rt Hon David (G'dford)


Chapman, Sydney
Hughes, Robert G. (Harrow W)


Chope, Christopher
Hunt, David (Wirral W)


Churchill, Mr
Hurd, Rt Hon Douglas


Clark, Hon Alan (Plym'th S'n)
Jack, Michael


Clark, Sir W. (Croydon S)
Jackson, Robert


Colvin, Michael
Jones, Gwilym (Cardiff N)


Conway, Derek
Kellett-Bowman, Mrs Elaine


Cope, John
Key, Robert


Cormack, Patrick
King, Roger (B'ham N'thfield)





King, Rt Hon Tom (Bridgwater)
Renton, Tim


Kirkhope, Timothy
Rhodes James, Robert


Knapman, Roger
Rhys Williams, Sir Brandon


Knight, Greg (Derby North)
Riddick, Graham


Knowles, Michael
Ridley, Rt Hon Nicholas


Knox, David
Rifkind, Rt Hon Malcolm


Lamont, Rt Hon Norman
Roberts, Wyn (Conwyj


Lang, Ian
Roe, Mrs Marion


Latham, Michael
Rowe, Andrew


Lawrence, Ivan
Rumbold, Mrs Angela


Lawson, Rt Hon Nigel
Ryder, Richard


Leigh, Edward (Gainsbor'gh)
Sackville, Hon Tom


Lester, Jim (Broxtowe)
Sainsbury, Hon Tim


Lightbown, David
Sayeed, Jonathan


Lilley, Peter
Scott, Nicholas


Lloyd, Sir Ian (Havant)
Shaw, David (Dover)


Lloyd, Peter (Fareham)
Shaw, Sir Giles (Pudsey)


Lord, Michael
Shaw, Sir Michael (Scrab')


Luce, Rt Hon Richard
Shelton, William (Streatham)


Lyell, Sir Nicholas
Shepherd, Colin (Hereford)


McCrindle, Robert
Shersby, Michael


Macfarlane, Sir Neil
Sims, Roger


MacKay, Andrew (E Berkshire)
Smith, Sir Dudley (Warwick)


McLoughlin, Patrick
Smith, Tim (Beaconsfield)


McNair-Wilson, M. (Newbury)
Soames, Hon Nicholas


McNair-Wilson, P. (New Forest)
Speed, Keith


Madel, David
Speller, Tony


Major, Rt Hon John
Spicer, Sir Jim (Dorset W)


Malins, Humfrey
Squire, Robin


Mans, Keith
Stanley, Rt Hon John


Maples, John
Steen, Anthony


Marland, Paul
Stern, Michael


Marlow, Tony
Stevens, Lewis


Marshall, John (Hendon S)
Stewart, Allan (Eastwood)


Marshall, Michael (Arundel)
Stewart, Andrew (Sherwood)


Martin, David (Portsmouth S)
Stradling Thomas, Sir John


Mates, Michael
Sumberg, David


Maude, Hon Francis
Summerson, Hugo


Maxwell-Hyslop, Robin
Taylor, Ian (Esher)


Mayhew, Rt Hon Sir Patrick
Taylor, John M (Solihull)


Mellor, David
Taylor, Teddy (S'end E)


Meyer, Sir Anthony
Tebbit, Rt Hon Norman


Miller, Hal
Thompson, D. (Calder Valley)


Miscampbell, Norman
Thompson, Patrick (Norwich N)


Mitchell, Andrew (Gedling)
Thorne, Neil


Mitchell, David (Hants NW)
Thornton, Malcolm


Moate, Roger
Thurnham, Peter


Montgomery, Sir Fergus
Townend, John (Bridlington)


Morrison, Sir Charles (Devizes)
Tracey, Richard


Moss, Malcolm
Tredinnick, David


Moynihan, Hon C.
Trippier, David


Mudd, David
Trotter, Neville


Neale, Gerrard
Twinn, Dr Ian


Needham, Richard
Vaughan, Sir Gerard


Nelson, Anthony
Viggers, Peter


Neubert, Michael
Waddington, Rt Hon David


Nicholls, Patrick
Wakeham, Rt Hon John


Nicholson, David (Taunton)
Waldegrave, Hon William


Nicholson, Miss E. (Devon W)
Walker, Bill (T'side North)


Onslow, Rt Hon Cranley
Waller, Gary


Oppenheim, Phillip
Walters, Dennis


Page, Richard
Ward, John


Paice, James
Wardle, C. (Bexhill)


Parkinson, Rt Hon Cecil
Warren, Kenneth


Patnick, Irvine
Watts, John


Patten, Chris (Bath)
Wells, Bowen


Patten, John (Oxford W)
Wheeler, John


Pattie, Rt Hon Sir Geoffrey
Whitney, Ray


Pawsey, James
Widdecombe, Miss Ann


Peacock, Mrs Elizabeth
Wiggin, Jerry


Porter, David (Waveney)
Wilkinson, John


Portillo, Michael
Wilshire, David


Powell, William (Corby)
Winterton, Mrs Ann


Price, Sir David
Winterton, Nicholas


Raffan, Keith
Wolfson, Mark


Raison, Rt Hon Timothy
Wood, Timothy


Rathbone, Tim
Woodcock, Mike


Redwood, John
Yeo, Tim






Young, Sir George (Acton)
Mr. Mark Lennox-Boyd and



Mr. Stephen Dorrell.


Tellers for the Noes

Question accordingly negatived.

Main Question put and agreed to.

Resolved,
That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 3rd November 1987; welcomes the prospect of continuing low inflation and steady growth as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on the continuing reduction in the share of national income pre-empted by public expenditure.

PETITION

Rating Reform

Mr. John Home Robertson: I am grateful to have such an enormous audience to hear this important petition which I wish to present on behalf of 636 residents of the town of Tranent and the neighbouring area in my constituency.
The petition calls on the House to repeal the Scottish poll tax legislation. I cannot think of many issues which have united Scottish public opinion to the same extent as this. The House should take account of the deep sense of outrage that the tax is arousing in Scotland. Tranent is an area which would be severely penalised by the imposition of the poll tax. For example, a family of three adults in a three-apartment house in Lindores drive, who currently pay a rates bill of about £435 a year, would have to pay more than double that figure, £1,050, under the poll tax. Meanwhile, people living in far more prosperous areas would pay substantially less.
I wholeheartedly endorse the terms of the petition from the Belters of Tranent and I support their appeal to the House to repeal this pernicious and dangerous legislation, which is an affront to the principles of democracy and to the nation of Scotland.

To lie upon the Table.

Health Services (Maidstone)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dorrell.]

Miss Ann Widdecombe: I do not wish to rehearse too much the background to the Health Service crisis which has so badly affected my constituency in the last six months, as that has already been done adequately through the diligence and eloquence of my hon. Friend the Member for Mid-Kent (Mr. Rowe), whom I see in his place and who raised the issue in the House a few weeks ago.
We have a brand new hospital in Maidstone. Last year there was an unprecedented rise in activity, so that we were treating about 30 per cent. more patients. That rise in activity was not predicted and could not reasonably have been so. That meant that the health authority was badly overrunning its budget.
The district health authority was already extremely efficient, because it had introduced privatisation measures, because it had cut waste and because it had already increased its throughput per patient bed; therefore, it had very little scope to find economies and savings to meet the additional strains upon the budget. It therefore reacted with ward closures. One major closure was in the brand new hospital. It also closed all physiotherapy facilities and threatened further ward closures.
I am very grateful to my right hon. Friend the Minister for Health for the immediate help which he made available and for giving us money enough to reopen those wards. I am also very grateful to him for the additional money which enabled Maidstone to appoint a third orthopaedic surgeon and a fourth gynaecologist to cut some of our severest waiting lists.
But those measures are addressed to the immediate crisis and are designed to cope with immediate problems. It is more to the future that I want to look tonight, because I have to cope in the constituency both with a very heavy legacy of the past six months, which in itself is bound to affect the future, and with the major question that I know to be in the minds of my constituents, which is not so much whether the present crisis is over as what guarantees we have that we shall not be in this situation again this time next year if we continue to be efficient and to increase our activity.
The legacy I am left with is one of badly increased waiting lists. A cardiac patient came to my surgery last Saturday who needs a test to establish whether he needs major heart surgery. The test, never mind the operation, will not be available until October 1988. He has been offered various appointments at various hospitals within the South East Thames area, but October 1988 seems at the moment to be the best that can be offered.
Cataract patients write to me in desperation and say that they are prepared to go to Inverness. They do not have quite to go to Inverness, but the nearest I found recently was Glasgow, which is not too far from there. My office has been turned into an agency for finding places for operations.
In the immediate term, this is something that can be addressed and can be tackled. It is about the future that I am particularly concerned — not only the future funding but the future adminstration of the South East Thames regional health authority. There has been very
Z

little in the past to inspire confidence on the part of the people of Maidstone in some of the decisions taken by the authority.
First of all, we were the only hospital in the entire region which, when it opened, was not given additional money for running costs. Secondly, a purely regional decision, not one that has been taken by other regions and not one that has been decreed by central Government, to change from RAWP to ACORN has removed £1·2 million from Maidstone's future expectations. When we are just recovering from a major crisis, to find that £1·2 million has been taken off our future expectations does very little to give us hope and confidence.

Mr. Andrew Rowe: Is my hon. Friend also aware that, in an apparently unique regional hospital authority decision, the hospital in Medway where students come gets no money at all towards paying the costs of those students? It appears to be the only regional authority in the country that has taken that decision.

Miss Widdecombe: I am grateful to my hon. Friend for his intervention and that addition to this debate.
Furthermore, those concerned work on out-of-date statistics which work very badly to Maidstone's disadvantage, calculating our allocation and our entitlement on birth statistics and population flows that were obtaining six years ago.
When the crisis erupted in Maidstone in the summer, I immediately entered into negotiations with the South East Thames authority to find out what it could do for us. It promised us two things, or rather half-promised us two things. First, it said that it would look at its finances and see if there was any flexibility for loan or other arrangements; secondly, it said that it would try to improve the statistics, which was bound to work to Maidstone's advantage.
Several months after the receipt of that letter, neither of those half-promises had been implemented. It was not until I managed to see the Minister, in conjunction with my hon. Friend the Member for Mid-Kent and my right hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley), that we finally got the extra money and help that we needed. According to a reply given to the hon. Member for Southport (Mr. Fearn), the authority has a budget of £933 million—Maidstone needed less than £1 million to keep its wards open—but, if it cannot manage the cash flow better than that, it does not hold out much confidence for the future of the South-East Thames region.
The South East Thames regional health authority is a little remote. It is in Bexhill-on-Sea. It is quite an intrepid character who goes to Bexhill-on-Sea. Whether one goes by road or rail, one needs a great deal of time on one's hands. The health authority said that it moved to Bexhillon-Sea because it was too expensive to stay in Croydon. It moved from Croydon to Bexhill-on-Sea, but it still has its empty, £600,000 premises in Croydon. For £600,000, we could have kept our wards open.
If it may be gathered from this that I am not wholly at one with the way in which the regional health authority operates, the fact remains that the authority does have the odd cross to bear. This is an urgent matter and I ask my hon. Friend the Minister to respond to certain points which could help the authority to help Maidstone.
I quoted from out-of-date statistics. The authority's consistent defence is that it does not decide which statistics to use. It is simply not supplied centrally with up-to-date figures. I wish to ask my hon. Friend whether it is possible to expedite the updating of those figures.
Secondly, there should be clear guidance to all regional health authorities to reward efficiency, because efficient district authorities do not have the scope to economise when they are faced with financial difficulties. Inefficient authorities do, so there should be a reward which recognises efficiency. If we had that, we would have had far fewer problems in Maidstone.
Thirdly, there is the underfunding of pay awards. I do not believe that it has been wrong for the Government to have some underfunding of pay awards. Blank cheques do not promote efficiency and the elimination of waste. Some authorities have reached an efficiency ceiling, but not all. Before we believe that an efficiency ceiling has been reached in the South East Thames area, I have here statistics which show Maidstone's performance to be well above that of others. Some authorities are not performing to the expected standards, but presumably are still funded for the expected standard. When an efficiency ceiling is reached, there is no longer the flexibility to react by the elimination of waste. I appeal both to my hon. Friend the Under-Secretary of State and to my right hon. Friend the Minister for Health to consider the effects of under-funding of pay awards on those areas which suffer through the regional allocations and which have already reached their efficiency ceiling.
I do not feel particularly penal towards the South East Thames regional health authority, but I think it would benefit the NHS as a whole if the regions were abolished. However, we shall have enough of that in two weeks' time in another debate. I shall not ask my hon. Friend to respond to that tonight because I am sure that she would not wish to do so.
Finally, we need an overhaul of the NHS and a reform of its structure and system as well as of our level of funding. In short, we must not roll from crisis to crisis.
I have a letter from the South East Thames regional health authority chairman which suggests to me that, although he can guarantee sufficient money — indeed, has already given sufficient money — to reopen our wards this year, he is concerned about the economies that have been implemented for the future.
I am concerned about where my constituents will find themselves this time next year. Will they still be queuing up at my surgery for me to find them operations in Glasgow, or will they be able to rely on proper rewards for efficiency, which is what my district health authority deserves and what is too little recognised throughout the South East Thames area?

The Parliamentary Under-Secretary of State for Health and Social Security (Mrs. Edwina Currie): I congratulate my hon. Friend the Member for Maidstone (Miss Widdecombe) on obtaining the debate and once again reiterating her concern about her local health authority, as she has also done in six recent parliamentary questions, in her contribution to the debate on the Health Service during the debate on the Consolidated Fund Bill on 8 December, at a meeting with other local Members of


Parliament with my right hon. Friend the Minister for Health on 30 November and in much correspondence with Ministers, some of which I have still to respond to.
I also commend my hon. Friend the Member for Mid-Kent (Mr. Rowe), who is in his place tonight. I commend both my hon. Friends to their constituents for their energy, interest and concern. I take note of what my hon. Friend the Member for Maidstone says about visitors to her constituency advice bureau and no doubt as a result of what she has said tonight she will have many more. In a few moments, I shall offer my hon. Friend some figures which may be new to her. I hope that, with her considerable experience of finance, she will find them interesting.
Maidstone district health authority's cash allocation for this year is over £32 million — a 8 per cent. change over the previous year, which, in turn, was nearly 6 per cent. more than in 1985–86. Also in recent years, the capital allocation has been between £2·5 million and £3 million each year, even after the opening of the magnificent new district general hospital, which, as my hon. Friend knows, I recently visited.
My hon. Friend asked whether we could obtain more updated figures and I share her interest and concern on that. She probably knows about the Korner reforms, which mean that statistics will be more readily available this year when the new system comes on stream. I hope that if, as a result, there is any comment about the cost of administration, clerical and computer staff, she will still consider it a good idea.
My hon. Friend talked about the underfunding of pay awards. I am sure that she realises that no Government ever give a blank cheque on pay awards. Certainly we do not, and have no intention of so doing.

Miss Widdecombe: I and everybody else fully accept that the Government do not write blank cheques, but neither does the region nor the district. Somebody must pick up those pay awards, which I accept are agreed by the independent review body, not the Government. All that I am appealing for is that the shortfall should not be such that it makes inroads into funds that should be spent on patient care—[Interruption.]

Mrs. Currie: The hon. Member for Rhondda (Mr. Rogers) says that we should give my hon. Friend a party card. I am not sure to which party he is referring.
My hon. Friend's point is well made and well taken. I merely put it to her that pay awards are not an alternative to service to patients. Paying our staff properly is part of our service to patients, particularly if it thereby ensures that we can keep the staff whom we want. Current discussions with the review bodies for the doctors, dentists and nurses will no doubt have their outcome in due course. However, I repeat that it would be a foolish Government who gave a blank cheque for pay awards in the middle of a pay negotiation. I am sure that my hon. Friend can find it in her heart to agree with something in that statement.
I hear what my hon. Friend says about the regional system. I am sure that she is aware that I shall not have a chance to respond to her debate on 26 January. However, I hope that she will recognise the recent valuable role of the regional health authority. Earlier this year, the region calculated that the total projected overspend among its districts would be over £9 million.
Those health authorities have a statutory duty to remain within their cash limits, as I have to remain within

my budgets. So the region correctly stressed that to the districts, and emphasised that reductions in service had to be made only as a last resort. Most of the districts, like Maidstone, introduced further savings measures not affecting patient care, such as slowing down some service developments and instituting income generation schemes. The region, too, has implemented savings and has clearly taken note of my hon. Friend's previous remarks, because I understand that it will be reducing its expenditure in 1988–89 by £275,000. We expect it to keep to its budget just as much as anyone else in the area.
However, a number of districts had to make temporary service reductions. To help those districts, the regional health authority co-ordinated what it called a cash management exercise, whereby health authorities whose cash position is less critical this year assisted by contributing to a regional pool to help the other authorities, such as Maidstone, that were facing particular problems. At that stage in the autumn, the region was predicting that it would break even in this financial year.
Then we had the storm, and we have since allocated, as my hon. Friend knows, £8 million to the South East Thames health authority for the damage done. That is what it asked for, and what it got. We then found that there were further emergency measures, some of which my hon. Friend has referred to, to avoid overspending. But there was also the announcement on 16 December of about £75 million extra for the hospital and community health services in England for this financial year.
South East Thames asked the district to bid for additional money, which it could use in this financial year to meet immediate problems of the sort that have been described. Maidstone asked for an additional £191,000, which I can tonight confirm that it will receive. That will enable Maidstone to reopen, later this month, the temporarily closed general surgical ward at Maidstone district general hospital, which will then no longer be on amber alert. Eighteen temporarily closed beds at Kent county ophthalmic and aural hospital will also reopen shortly. An additional programme of joint replacement operations at the local private hospital will be undertaken, until another ward at the district general hospital can be commissioned to enable such operations to take place there.
Two wards that have been temporarily closed at Linton and Preston Hall hospitals might also have been reopened with the money, but they are having to be used to accommodate some patients from Maidstone hospital psychiatric wing, which had to be evacuated following extensive storm damage. I hope that my hon. Friend can accept that. In addition to the £191,000, Maidstone will get a further £135,000, which will go towards reducing its credit of balances and put the authority on a sounder financial footing for the coming year.
My hon. Friend is probably aware that we have been repeatedly advised by our financial advisers that if we delay paying our creditors for too long, all they do is put the prices up next year; so it is a sound, counter-inflationary measure to ensure that our health authorities have a reputation for paying on time. As a result, since my hon. Friend last raised the question with me, Maidstone district health authority has received an extra £326,000 for this financial year.
I fully accept that, after being able to reopen temporarily closed services with additional Government money, Maidstone does not want to be in the same


position again next year or, indeed, in April of the coming year, when it may have to close some services again. It is for the regional health authority to decide on allocations to districts, and it will be doing that for 1988–89 on 21 January. That is the present system. I know that district and regional officers are discussing bridging finance from the region to help Maidstone get back on a sounder financial footing, but my hon. Friend will appreciate that, for the moment and for the foreseeable future, this is primarily a regional responsibility. However, I shall make sure that the region is aware of her views and those of my hon. Friend the Member for Mid-Kent.

Dame Peggy Fenner: My hon. Friend will observe that many of my hon. Friends who serve and represent constituencies in the South East Thames region are sitting in this evening. We would emphasise that we all share the concern of my hon. Friend the Member for Maidstone (Miss Widdecombe) about what will happen in the next allocation. We hope that, even under the present system, my right hon. and hon. Friends will ensure that the South East Thames region takes account of the several deprived districts in its area.

Mrs. Currie: My hon. Friend has made her point extremely well. I should also draw attention to the presence in the Chamber tonight of my hon. Friends the Members for Dover (Mr. Shaw), for Sevenoaks (Mr. Wolfson), for Gillingham (Mr. Couchman) and for Faversham (Mr. Moate), and to that of one or two Opposition Members who come from a long way away.

Mr. Allan Rogers: rose—

Mrs. Currie: No, forgive me, but I shall not give way because I do not have the time.
My hon. Friend the Member for Maidstone has drawn attention to the statistics that are based on performance indicators which, as she rightly says, come from the data for 1985–86 which, of course, are the latest information that I have. She is quite right that the authority has a high throughput. Indeed, it is one of the best in the country. I am talking mainly about Maidstone hospital. Although in fact it is not the best in South East Thames regional health authority—All Saints is the best—Maidstone is highly efficient and cost-effective.
The costs per case of Maidstone district health authority were £601 for 1985–86. I agree that that compares favourably with, for example, Brighton at £1,194 per case, Orpington at £1,074 per case or Lewisham at £1,257 per case. They are all similar hospitals—major district general hospitals with more than 250 beds. Among the 21 similar hospitals in the region, Maidstone ranked not first, but sixth in terms of cost per case. Kent and Canterbury and Eastbourne district general hospitals are cheaper. Although the difference is not great, it is worth putting it on record.
In terms of medical and dental costs per case, Maidstone DGH ranks not first but seventh in the regional health authority. The Royal Sussex county hospital, for example, spends much less on nursing per case and Greenwich district general hospital spends much less on medical staff per case. However, Maidstone has very good hotel and maintenance costs, which is amazing. I am curious to know why it costs nearly four times as much to

run the ancillary services at Brighton general hospital as at Maidstone. Perhaps our two splendid lady chairmen, Mrs. Cumberlege and Mrs. Nelson, could get together on that and share lessons.
I know that the regional health authority is reviewing its policy on cash allocations — [Interruption.] I am disappointed in the hon. Member for Rhondda. He is usually interested in health matters. I also know that the regional health authority—

Mr. Rogers: rose—

Mr. Speaker: Order. It is a tradition that hon. Members do not interrupt, especially from a sedentary position, during Adjournment debates.

Mr. Rogers: I was asking the Minister to give way.

Mrs. Currie: The hon. Gentleman knows that time is restricted in Adjournment debates.
My hon. Friend knows that the regional health authority is reviewing its policy on cash allocations for mental illness. It is essential that in all the discussions about the pressure on acute services, we do not lose track of the need for services for those with mental handicap, mental illness or other groups who, perhaps, are not always in a position to make much fuss. I have no doubt that Maidstone district health authority's feeling that other DHAs, which send large numbers of patients to Maidstone, are getting something good on the cheap, will be taken into account. I gather that the DHA says that it is between £300,000 and £400,000 out of pocket as a result of treating out-of-district mental illness patients. There may be some discussion about the exact amount, but I know that the region has taken that fact on board.
I also know that, following the regional health authority's meeting on 19 November, further work is being done on bed usage at Maidstone and on whether there is scope for increasing the use of day care and short-stay accommodation. The district health authority has recently shown considerable improvements on the day-case side, but in ear, nose and throat treatment, 95 per cent. of patients are in-patients. I have no doubt that in its discussions the DHA will take account of facts such as bed occupancy in ENT, for which there is a waiting list of well over 500 for non-urgent surgery and treatment. The figure is over 400 for opthalmology. The occupancy for those specialties has been below 50 per cent. for many years. On the other hand, the gynaecology department treats more than 20 per cent. of its patients as day cases and has relatively good occupancy rates and a tiny waiting list. I make no judgment from those figures but hope that the regional health authority will consider them. I am sure that with good will and the willingness to change some long-held practices, issues such as these can be resolved in the interests of patients, possibly without using additional funds.
We have to make a point here about planning. Estimates of future patient numbers, on which we base much of our financial planning, are based partly on recent history and demography, and partly on population patterns and changes. Whether or not they are six years out of date, I can assure my hon. Friend the Member for Maidstone that every effort is made to take them fully into account. We also base our financial planning on any planned growth of services such as an additional consultant or expected changes in practice.
In 1982–83, the growth of in-patient cases in Maidstone was 1·5 per cent. In the following years it was 4 per cent. and then 5 per cent. In the year after that, it seemed to have levelled off because there was a very small drop in activity for in-patients at about 1 per cent. What is then clear is that the 13 per cent. jump in in-patient cases in the following year took everybody by surprise. Indeed, nobody could have planned for that and known that it would happen. I do not think that anyone would have believed the people of Maidstone if they had said to us blithely that they expected an increase in numbers of inpatient cases of 13 per cent. in one year.
It is a tremendous tribute to all the staff concerned that they managed to cope with such an increase in demand. I do not believe that the regional health authority should be blamed for its failure to anticipate that sort of growth. I suspect that, even if it had anticipated it, other DHAs would have objected strongly to anything like a 13 per cent. increase being given to Maidstone in a year.
In relation to the cost of the region's accommodation, I understand that if it had not moved in 1983, it would have been faced by a rent review in Croydon, and the rent would have cost about £1 million a year.

Miss Widdecombe: At least the authority would have got something for it.

Mrs. Currie: What the authority did was to buy the existing premises at Bexhill and expenditure since has been much less than it would have had to pay at Croydon. I assure my hon. Friend the Member for Maidstone that the region has been active in trying to dispose of the remainder of the lease and no doubt will do so shortly. However, we have an extra £800,000 in revenue savings as a result of the move, which has been spent on improving mental illness, mental handicap and renal services. I hope that this information is helpful to all my hon. Friends.
Question put and agreed to.
Adjourned accordingly at thirteen minutes to Eleven o'clock.